You are interested in selling a General Motors (GM) bond that you bought 3 years ago. The bond has a face value of $10,000, a remaining maturity of 17 years, and a coupon rate of 3%. GM has a BBB credit rating for these bonds. Other BBB bonds being issued today offer a coupon rate of 2%. Use this information for Questions 1 and 2.

1. How much is your bond worth today?

2. What would be the value of this bond if it had only 4 more years until maturity? What causes the difference?

3. You are considering buying a US government Zero Coupon savings bond. This bond has a face value of $5000, a time to maturity of 8 years, and an interest rate of 4%. What would you expect to pay for this bond today?

4. Your broker has recommended an IWI corporate bond with a BBB rating. It has a face value of $10,000, a coupon rate of 5% and 6 years remaining to maturity. Current BBB corporate bonds have a yield of 3.5%. What is the value of that bond today?

5. If you had bought the IWI bond from Question 4 at its face value 4 years ago, and then sold it today at the value you calculated in Q4, what would be the return on that investment?