EXERCISE #$1$: A $5-$year $7\%$ annual coupon bond yields $6\%.$ Draw the picture for the face

value of $$10,000.$

The price of the bond $P_0=$$

would be quoted in the paper as

The current yield is

$\%.$

The yield to maturity is

$\%.$

You buy the bond for the price you computed, hold it for one year, receive the coupon cash

flow, and sell it for $94\mathrm{.}8670.$ The realized yield on your investment is:

Compute the yield to maturity on the bond at the time of the sale, remembering that the

bond now has only $4$ years left to maturity. Use $$1000$ as face. Solve on a financial

calculator for $i$ :

$i=$dots..dots...........$\%$

EXERCISE #$2$: A $3-$year $5\%$ semiannual coupon bond yields $4\mathrm{.}5\%.$ Draw the picture for

the face value of $$10,000.$

The price of the bond $P_0=$$

would be quoted in the paper as

EXERCISE #$3$: Draw the timeline for a $4-$year $6\%$ semiannual coupon bond with a face

value of $$100.$

Compute the current yield and the yield to maturity for the bond assuming the price is:

A$.P=104FV=,PMT=,PV=n=$ Press $i,ytm=$dotsdotsdots$\%$ cy $=$dotsdotsdots$\%$

B$.P=96FV=PMT=,PV=n=$ Press iytm$=$dotsdotsdots$\%$ cy $=$dotsdotsdots$\%$

EXERCISE #$4$: A $5-$year $4\%$ A$-$rated corporate bond's yield to maturity is $6\%.[$Assume

annual or semiannual.$]$

Quoted Price $=$

The bond gets downgraded to BB$-.$ It's yield is likely to be

than $4\%$ and

than $6\%,$ and the price is likely to be

lower$/$higher

$\%$

The price of the bond $P_0=$$

would be quoted in the paper as

$|$

$----------------.-$

EXERCISE #$4$: A $5-$year $4\%$ A$-$rated corporate bond's yield to maturity is $6\%.[$Assume annual or semiannual.$]$

$....................$ than $6\%,$ and the price is likely to be lower$/$higher

less$/$greater

than

C

EXERCISE #$5$: A $5-$year $6\%$ annual coupon bond yields $4\%.$ The bond is callable two

years at $102.$ What is the yield to call? Solve the problem in stages.

Compute the price of the bond first. Assume face $=$$$1000.P_0=$

Draw the picture of the bond's cash flows assuming it will be called in one year and

compute the yield to call.

I $|$ i$=..............\%$

Draw the picture of the bond's cash flows assuming it will be called in two years and

compute the yield to call. $$

$i=$

$|---------------------|$