Question: Problem 2: Consider a 10-year bond that pays a 5 percent coupon semi-annually with a face value of $1000. a. What is the price of

Problem 2: Consider a 10-year bond that pays a 5 percent coupon semi-annually with a face value of $1000.

a. What is the price of this bond if the annualized yield to maturity of 4 percent (i.e., the stated rate is .04 compounded semi-annually)?

b. What is the price of this bond if the annualized yield to maturity of 5 percent (i.e., the stated rate is .05 compounded semi-annually)?

c. What is the price of this bond if the annualized yield to maturity of 6 percent (i.e., the stated rate is .06 compounded semi-annually)?

d. What is the price of this bond if the annualized effective rate is 5 percent?

Problem 3: Consider the bond described in Problem 2 above but let the coupon be paid annually. Answer questions a through c in Problem 2 above for this annual coupon paying bond.

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