Answer the 3 following questions.

1. Which security has a higher effective annual interest rate?

a. A 3-month T-bill selling at $97,645 with par value $100,000. OR

b. A coupon bond selling at par and paying a 10% coupon semiannually"

2. A 20-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is:

a. $950

b. $1,000

c. $1,050

3. Consider an 8% coupon bond selling for $953.10 with three years until maturity making annualcoupon payments. The interest rates in the next three years will be, with certainty, r1= 8%, r2=10%, and r3= 12%. Calculate the bonds (a) yield to maturity and (b) realized compound yield.