1. You have a zero coupon bond with a maturity of 23 years with a required rate of 7.96%. The bond has a face value of $1,000. What is the price of the bond? a. What is the yield to maturity? 2. A coupon bond has 10 years to maturity. Face value = $1,000 The coupon rate = 7.5% Currently the market rate for a 10 year bond = 8.21% What is price of the bond? a. Three years after issuance the market rate increases to 9%. Now what is the bond price? b. Five years after issuance the market rate decreases to 6%. Now what is the bond price? 3. Assume the use of a yield curve, the market has different yields for different maturities. 1 year interest rate = 3% 2 year interest rate = 3.5% 3 year interest rate = 4.75% 4 year interest rate = 5.8% 5 year interest rate = 8% Using the above yield curve, what is the current price of the bond with a coupon of 6.3%? 13