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1. A $1,000 par value bond is currently selling for $1,030. This bond has a coupon rate of 7% and coupon is paid semiannually on Jan 1^st and July 1^st each year. Today is November 1^st and you just bought this bond. How much will you billed for buying one bond?

A. Four years ago, Planet Corp. issued 25- year original maturity bonds at par. The coupon rate on these bonds is 9.45% and the coupon is placed semi-annually. Your bonds broker has quoted the current price of these bonds as 92% of par. Calculate the following:

-Current Yield (CY)

-Yield to Maturity (YTM)

-Effective Annual Yield

B. You just bought a AAA rated bond of Smart Corp. for $1084.60. This bond pays 6% coupon annually. The bond was issued 14 years ago with an original maturity of 30 years. Calculate the YTM on this bond.

C. A zero coupon does not give any periodic payments and are also known as Zeros. XYZ Corp. has a zero coupon bond outstanding with 28 years left to maturity. Find the current market value of this bond if the market rate of interest at this time is 8.25%. (You would need to assume semi-annual compounding)

D. Municipal bonds are usually preferred by individuals in high income tax bracket. Assume that an investor is currently in 30 percent tax bracket. This investor has two alternative investment opportunities: A bond issued by XYZ Corp. that has a current yield to maturity of 9 percent or a Municipal bond issued by state of Massachusetts to fund construction of a student dorm. The Municipal bond yield to maturity at this time is 7%

- Which of these to alternative investments should be chosen? Give calculations to support your answer

- At what tax rate would this investor be indifferent between XYZ Corp bond and the Muni?