You have the opportunity to buy a bond that pays a 5% coupon rate, has a face value of $1000, makes coupon payments annually, and matures in 30 years.

1. If the bonds yield to maturity is 8% annually compounded, what should its price be?

2. What is the bonds current yield? What is the bonds capital gains yield?

3. Suppose you do indeed buy the bond above, hold it for ten years and then sell. Assuming the YTM in ten years is the same 8 percent, what price will you sell the bond for?