Problem 1:

Consider a

$

1000

bond with a coupon rate of 10% and annual coupons. The

par value is $1,000, and the bond has 5 years to maturity. The yield to maturity is

9

%.

For

each question,

s

how your

wo

rk/

calculations

.

A.

What is the

present value of coupons

?

B.

What is the

present value

of face value (i.e. par value)

?

C.

What is the value of the bond

?

D.

Is it a prem

i

um

or

discount

bond?

Problem

2

:

Consider a

$

1000

bond with a coupon rate of

7.5

% and annual coupons. The

par value is $1,000, and the bond has

10

years to maturity. The yield to maturity is

10

%.

For

each question,

s

how your

wo

rk/

calculations

.

A.

What is the

present value of coupons

?

B.

What is the

present value

of face value (i.e. par value)

?

C.

What is the value of the bond

?

D.

Is it a prem

i

um

or

discount

bond?

Grading Criteria:

Your submission

will be evaluated based on the following criteria (1%):

Content: adequate coverage of topic, logic of arguments,

relevance and indication

of all used resources.

Presentation/Clarity: use of appropriate headings, appropriate organization, and

ease of understanding.

Accuracy: free of spelling, grammar, and content errors.