Show Your Work Problem 1:

A $1,000 par value bond has 3 years until maturity,8 percent annual coupon rate,and coupon payments are madesemi-annually.Theannual yield to maturity is 9.5 percent.

a. What is the periodic coupon payment each period for this bond?

b. Calculatethe bond's priceandshow the keys that you use in your calculator.

c. Draw the time lineshowing all the cash flows (dollar amounts) including price, coupon payments and the face valuefor the bond and then use arrows showing the direction for discounting them to equal the current price.

Show Your Work Problem 2:

For each of the following problems, draw the timeline, place the cash flows in the appropriate place on the timeline, and show which direction the arrows should go (ie. discounting or compounding). Then solve the problem andcircle your answer!

a. Find the present value of a three-year annuity due with $500 payments and an 8% discount rate.

b. Find the present value of a $500 perpetuity with an 8% discount rate.

c. Suppose that you deposit $1000 into a savings account today, then deposit $2000 in one year, then $3000 the year after that. What will the future value of this account beat the end of 5 yearsif you can earn 8% on your money?