1) Bill buys a 12-year bond with a face value of $1000 and an annual coupon rate of 6%. All coupons are paid annually and the first coupon received in year one. Bill pays $1030 for the bond. As soon as the coupons are received Bill invest them in a fund earning an effective annual rate of 6.5%. What is the yield on Bill's total investment?

2) Consider the following investment: The investment pays a decreasing annuity due with the first payment of $6 at the beginning of year 1 decreasing to a $1 payment at the beginning of year 6. The investment then pays $2 at the beginning of year 7 and increases by $1 per year until it pays $8 at the beginning of year 13. The investment then pays a steady $9 from the beginning of year 14 until the beginning of year 21. If i = 5.5%, calculate the selling price of this investment shortly before the first payment.

3) A stock is expected to pay a dividend of $10 at the end of year one. The dividend is then expected to grow at a rate of 8% per year for the next four years. The dividend is then expected to grow at a rate of 3% per year forever. If the annual effective rate for this stock is 8%, use the dividend growth model to calculate the price of the stock.