Using EXCEl answer below questions:

1) A firm is selling $10,000 par value bonds with a coupon rate of 4.5% coupon rate paid annually. They mature in five years. The yield to maturity on those bonds is currently 3.44%.

A) At what price should the bonds sell now?

B) Two and one half years from above the bonds are now selling at $950. What should be the yield to maturity at that time?

C ) If an investor bought the bond when it had five years to mature in a. above and sold the bond at the price in b. above, what would be their holding period rate of return?

D ) Using the same data in c. above, what would be the compounded annualized growth rate of return on the investment?

PROBLEM 2 (10 points per response)

2) V.I.K. Corp. has a credit rating of A and is planning to issue 17-year bonds with a $1000 face value and a 12.25% coupon rate paid semi-annually. Recently, three trenches of 17-year bonds were issued by L.J.K. Corp., a company with a credit rating of A. They offered an 11% coupon rate paid semi-annually and sold at a price of $910. E.N.L. is a municipality with a junk bond rating.

A) What should be the price of a VIK bond when it is issued?

B) What is the current yield of the VIK bond two years later if selling for $1200 at that time?

C) After four years, the price of a VIK bond is $1045. What is the bond's new yield to maturity?

D) Assume you are an investor who bought a VIK bond when issued at the price in a. above and sold it at four years later at the price in c. above, what would be your holding period rate of return?