1. What is the value of a bond that has a 5% coupon, matures in 17 years and current market rates for this risk-class of bonds is 4%?

2. What is the YTM of a bond that is selling for $1,075, has a 4% coupon rate and matures in 6 years?

3. For each pair of bonds circle the one which will be the most interest rate sensitive (with the largest duration):

Bond A	Bond B
3% coupon, matures in 6 years	5% coupon matures in 6 years
Bond A	Bond B
6% coupon, matures in 10 years	6% coupon, matures in 15 years

4. Fill in the table for each of the following bonds if the current market rate of interest is 7%. You can work the duration either semi-annually or annually. But please work the price of the bond semi-annually.

FIRM	Coupon	Maturity	Price	Duration	Rank (1= lease volatile; 4= most)
A	3%	5
B	3%	9
C	8%	7
D	0%	10

5. If the duration of a bond is 8, what will be the change in the price of the following bond? The current price is $98 The YTM is changing from 6.5% to 6%.

6. The following information concerns a convertible bond:

Coupon = 4%

Conversion price = $40

Maturity = 15 years

Call price = $1,040

Price of the common stock = $35

1. If the bond were a nonconvertible what would be the approximate value if current market rates are 6%?
2. Into how many shares can the bond be converted?
3. What is the value of the bond in terms of stock?
4. What is the current minimum price the bond will command?
5. If the current market price of this convertible bond is $900, what might you do?
6. Is there any reason to anticipate that the firm will call the bond?