QUESTION 1

Suppose you purchase a $1,000 face value zero coupon bond today with 20 years until maturity and a yield to maturity of 1% APR with annual compounding. If in one year the yield to maturity is 5%, how much did you gain or lose on this bond?

		Lose more than $400
		Lose between $200 and $400
		Lose between $0 and $200
		Gain between $0 and $200
		Gain between $200 and $400
		Gain more than $400

QUESTION 1A

A zero coupon bond matures in 9 years, has a face value of $1,000, and currently yields 12% APR with semi-annual compounding. What price should this bond trade at today?

		Less than $500
		Between $500 and $600
		Between $600 and $700
		Between $700 and $800
		More than $800