1) For a one year fixed coupon bond, if the coupon rate is 10%, the face value is Rs 100 and the interest rate in the market is 5%. (6 Marks) a) What is the price of the bond? b) What is the new price of the bond if the interest rates in the market increases to 10%? c) What is the new price of the bond if the interest rates in the market decreases to 3%?

2) Find the price of a variable coupon bond that offers coupon payments of Rs 10 in the first year, Rs 20 in the second year and Rs 30 in the third year. The face value of the bond is Rs 100. The interest rate in the market is 10%. (4 Marks) a) What is the price of the bond? b) What is the new price of the bond if the interest rate in the market changes to 5%?

1. An investor has to pick one of the following three projects A, B or C. The cash flows from each project are given in the table below. (10 Marks)

	Project A	Project B	Project C
Year 0	-100	-150	-200
Year 1	50	50	100
Year 2	30	50	100
Year 3	20	50	50
Year 4	50	100	60
Year 5	120	120	80

You can use excel to answer the following questions.

1. What is the payback period of each project? According to the payback period which project would you prefer?
2. What is the NPV of each project? According to the NPV which project would you prefer?
3. What is the IRR of each project? According to the IRR which project would you prefer?