Question: Question 1 (a) If inflation is expected to increase significantly in the near future, what effect would that have on the price of a bond.

Question 1 (a) If inflation is expected to increase significantly in the near future, what effect would that have on the price of a bond. (b) What is the present value of a bond with a $1000 face amount, 2% annualized coupon, paid semi- annually, with a 1 year maturity, assuming a 4% annualized discount rate(yield or required rate of return) compounded semi- annuallly? (c) What is the present value of a bond with a $1000 face amount, 4% interest rate paid annually, 7 year maturity, and a discount rate(yield or required rate of return) of 3%, compounded. (d) What is the PV of a $1000 bond face amount, with an annual coupon rate of 7%, a maturity of 2 years, assuming a required rate of return of 5%(annual compounding)?

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