You are planning to attend an master level Program that will require payment of $11,000 a year

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You are planning to attend an master level Program that will require payment of $11,000 a year in tuition expenses at the end of each year for 2 years. Bonds currently yield 8.35%. a What is the present value of your obligation ? ( sample answer:$25,000) b What is the duration of your obligation ? (sample answer:2.53years) c Suppose you wish to fund your obligation using 1-year zero-coupon bonds and perpetuity bonds. How much of 1-year zero in dollar (inputexample:$25,000)and how much of perpetuity bondsin dollar (sample answer:$25,000 ) will you want to hold to both fully fund and immunize your obligation? Suppose you buy 1-year zero-coupon bonds and perpetuity bonds to immunize your obligation.Now suppose that rates immediately increase to 9%. e. What is your tuition obligation now?(sampleanswer:$25,000) f. What is the value of your position in 1-year-zero-coupon bondsnow ?(sample answer:$25,000) g.What is the value of your position in perpetuitynow ? (sample answer:$25,000)

2.As a bond analyst at Morgan Stanley Investment Banking, you are performing an analysis on bond yield. You have the following data for a bond issued by Intel Corp. The bond has 7% coupon and 20-year maturity. The bond sells for $1,150 and is callable in 10 years at a call price of $1,250. The bond has a face value of $1000 and makes semiannual coupon payments. a. What is the annualYield to Call? (sample answer: 12.45%) b. What is the annual Yield to Maturity? (sample answer: 12.45%)

3As a financial analyst at Wells Fargo, you are analyzing how the change in yield impacts the bond price. A bond has a duration of 11years, a yield of 10%, a convexity of 140, and a market price of $1,000. Suppose the market yield increases by 60 basis points. What is the percentage change in the bond's price by the duration only formula? (sample answer:2.25%or -2.25%) What is the bond price after the yield change predicted by the duration only formula? (sample answer:$1050.65) What is the percentage change in the bond's price predicted by the duration with convexity formula? (sample answer:2.25%or -2.25%) What is the bond price after the yield change predicted by the duration with convexity formula? (sample answer:$1050.65)

4As a junior financial analyst at Citibank bond trading desk, John is analyzing the forward rate using the information from zero coupon bonds. Suppose 3 year zero coupon bond is priced at $839.60 and 4 year zero coupon bond is priced at $822.80. Choose all correct answers. Please note that each incorrect answer will reduce the score by 10%.

	a.	The forward rate from year 3 to 4 is 4.04%
	b.	The3 year zero coupon bond which ispriced at$839.60 will have a YTM of 7%.
	c.	The 3 year zero coupon bond which ispriced at $839.60 will have a YTM of 6%.
	d.	The4year zero coupon bond which ispriced at$822.80 will have a YTM of 7%
	e.	The4year zero coupon bond which ispriced at$822.80 will have a YTM of 6%
	f.	The3 year zero coupon bond which ispriced at$839.60 will have a YTM of 8%.
	g.	The forward rate from year 3 to 4 is 2.04%
	h.	The forward rate from year 3 to 4 is 3.04%
	i.	The4year zero coupon bond which ispriced at$822.80 will have a YTM of 5%

5.A financial analyst at JPMorgan Chase is evaluating a Treasury Inflation-Protected Security (TIPS bond) with a 3-year maturity, par value of $1,000, and a 8% coupon rate. The estimated average inflation rate will be 4% over the first year, 5% over the second year, and 6% over the third year.

What is the amount of the coupon payment the bond holder will receive in the first year ?sample answer: $45)Second year ? (sample answer: $45) What will be the face value of the bond at the end of first year ? (sample answer: $1,245.45) The second year ? (sample answer: $1,245.45)