1. Suppose the annual yield to maturity of a long-term US Treasury bond is 3.7%. The bond is selling for 112% of its face value. The coupon rate of this bond is likely to be:
   1. 3.5% per year.
   2. 3.9% per year.
   3. 4.1% per year.

Explain your choice

2. Suppose AMZN has these three outstanding bonds. Bond A is a 10-year Callable bond. Bond B is a 10-year secured bond. Bond C is a 10-year senior bond. Which one is most likely to have the highest yield and why?

3. Suppose TSLA has two outstanding bonds. Bond A is a 10-year bond with a coupon rate of 5% per year paid semi-annually. Bond B is a 5-year bond with a coupon rate of 5% per year paid semi-annually. The yield to maturity on both is 6% per year.
   1. What are the prices of these two bonds?

2. Suppose there is a sudden decline in interest rates and the yield to maturity of both declines to 5%. What will be the new prices of the two bonds?

3. Calculate the percentage change in the price of each from part (a) to part (b). Which bond changed by the largest percentage? Can you identify why the two bonds changed by different percentages?