3. The YTM on a six-month Treasury STRIP is 4.4%, and the YTM on a one-year Treasury...

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3. The YTM on a six-month Treasury STRIP is 4.4%, and the YTM on a one-year Treasury STRIP is 5.7%. All YTMs are quoted as APRs with semiannual compounding. Given this information, what would be the price of a one-year coupon bond with a coupon rate of 4.8%, semi-annual payments and a face value of $1000?

The price of the bond would be $991.52 (Round to two decimal places.) (why is this the right answer?)

4. Epiphany is an all-equity firm with an estimated market value of $500,000. The firm sells $400,000 of debt and uses the proceeds to purchase outstanding equity. Compute the weight in equity and the weight in debt after the proposed financing and repurchase of equity.