Module 2 Intermediate/Advanced Practice Problems 1. A 10-year bond is issued with a face value of $1,000, paying interest of $60 a year. If market yields increase shortly after the T-bond is issued, what happens to the bond's a. Coupon rate? b. Price? c. Yield to maturity? 2. The following statements are true. Explain why. a. If a bond's coupon rate is higher than its yield to maturity, then the bond will sell for more than face value. b. If a bond's coupon rate is lower than its yield to maturity, then the bond's piece will increase over its remaining maturity. (This problem is referred to as Chapter 3, Problem 2 in the instructor solution videos.) 3. In February 2009, Treasury 6s of 2026 offered a semiannually compounded yield of 3.5965%. Recognizing that coupons are paid semiannually, calculate the bond's price. (This problem is referred to as Chapter 3, Problem 3 in the instructor solution videos.) 4. Here are the prices of three bonds with 10-year maturities: Bond Coupon (%) Price (%) 2 81.62 4 98.39 8 133.42 If coupons are paid annually, which bond offered the highest yield to maturity? Which had the lowest? Which bonds had the