Question: 1 . A bond has a $ 1 , 0 0 0 par value, 1 2 years to maturity, and an 8 % annual coupon

1 .

A bond has a $

1, 000

par value,

12

years to maturity, and an

8 %

annual coupon and sells for

980 .

.

What is its yield to maturity

(

YTM

) ?

.

Assume that the yield to maturity remains constant for the next three years. What will the price

3

years from today?

2 .

Nesmith Corporation

s outstanding bonds have a $

1, 000

par value, an

8 %

semiannual coupon,

14

years to maturity, and an

11 %

YTM

.

What is the bond

s price?

3 .

You are considering a

10 -

year, $

1, 000

par value bond. Its coupon rate is

8 %,

and interest is paid

semiannually. If you require an

effective

annual interest rate

(

not a nominal rate

)

7.1225 %,

how much should you be willing to pay for the bond?

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