I needed help with this problem. Please show calcuations

1. Assume $1,000,000 par value, semiannual US coupon treasury note. 3 year maturity (YTM) has a coupon rate of 3%

Yield to maturity of the bond is 8.80%. Calculate value of treasury note.

answer choices. pick one

a. $849,937.86

b. $722.477.18

c. $1,019,925.43

d. $535,460.85

2. assuming the interest rates remain constant T note price is expected to ( increase or decrease ) pick one

a. The T note is selling at a (premium or discount) pick one

b. when valuing semi annual coupon bond, the time period N in the present value of the formula used to calculate the price of the bond in terms of( 4 mo, 6mo, 12month annual) pick one.

3. The real risk free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to3% per year for each of the next three years and 2% thereafter.

The maturity risk premium (MRP) is determined from the formula: 0.1 (t-1) where t is the security maturity. The liquidity premium (LP) on all Pellegrini Southern Inc bonds is 0.55%. THe following table shows the current relationship between bond rating and default risk premium (DRP)

Rating Default risk premium

us treasury

AAA 0.60%

AA 0.80%

A 1.05%

BBB 1.45%

Stone Inc issues 12 yr, AA rated bonds, What is the yield on one of these bonds? Disregard cross product terms, this is, if averaging is required, use the arithmetic average.

pick one

a. 6.95%

b. 6.40%

c. 5.25%

d.7.50%