Suppose there are two securities, A and B. Security A is a 3 year security, interest only, coupon of 9 percent, par value of $10,000. Security B is also a 3 year security, priced at $10,000, and 3 payments of principal and interest of $3,950.55 are to be received annually at the end of each year.

1. (10 points) What is the yield to maturity on each of these securities? SHOW YOUR INPUTS USED ON YOUR CALCULATOR.

2. (20 points) What is the duration (D) for each of these securities? SHOW YOUR WORK.

3. (5 points) Which security, A or B, has a lower weighted average number of years to realize total cash flows from the investment?

ALL WORK NEEDS TO BE SHOWN ON FINANCIAL CALCULATOR