1.You are considering purchasing a bond that has 4 years to maturity with 6% coupon rate. Comparable investments are expected to provide 4% annual return. How much would you pay for this bond?

2.You purchased the bond in the previous question - 4 year 6% coupon bond - at the price of $1072.60. You plan to hold the bond until the bond matures. What is the annual rate of return from the bond investment?

3.You bought the bond in question1 - 4 year 6% coupon bond - at the price of $1072.60. Now, instead of holding it for the next 4 years, you plan to sell it in 2 years at the price of $1070. If your plan works out, what is the annual rate of return from your 2-year investment?

4.You just purchased a 6-year, 8% coupon bond at the price of $955.15. Please select a statement that is incorrect from below. a. Price of this bond will gradually converge to it face value as it gets closer to its maturity.

b. This bond is a premium bond because yield to maturity of the bond is greater than its coupon rate.

c. YTM of the bond is 9.00%

d. Current yield of this bond is 8.38%

5.You purchased a 6 year, 8% coupon bond at the price of $955.15. You figured out that the yield to maturity of the bond is exactly 9%, which is equal to the market rate of return to similar bonds. Instead of keeping the bond to its maturity, you plan to sell it in two years. If the market rate of return stays the same at 9%, what will happen to the price of the bond?

a. You cannot predict the future price of a bond even when the market rate of return does not change.

b. Price increases even when the market rate of return does not change.

c. Price falls when the market rate of return does not change.

d. Does not change and stays at $955.15