1. Todays date is April 15th. A bond with a 12% coupon paid semi-annually every Jan 15th and Jul 15th is listed in the WSJ at an asked price of 101:04. What price will you pay if you buy the bond today (face value is $1,000)? (Recall: invoice price = flat price + accrued interest)
2. The current yield of a bond is defined as the ratio of the interest payment to price. A $1,000-par value bond paying a 6% annual coupon and selling for $960, for example, has a current yield of 60/960 = 6.25%.
   1. What is the bonds yield-to-maturity (YTM) if it has 5 years left to maturity?
   2. Can you try to explain why current yield will always be higher than the coupon rate and lower than YTM for a bond trading at a discount?
   3. What is the 1-year holding period return of the bond if the yield after one year is 6%? (Remember: holding period return is comprised of price return + interest. What price is the bond going to be selling at if its yield is 6%?)