QUESTIONS

Calculate the present value $ofa$ $$1,000$ zero$-$coupon bond with five years $to$ maturity

$if$ the yield $to$ maturity $is6p\%.$

Consider a bond with $a7\%$ annual coupon and a face value $of$ $$1,000.$ Complete the

following table.

What $is$ the yield $to$ maturity $of$ a zero$-$coupon bond, with two years $to$ maturity, $if$ its

current price $is$ $$85,$ and its face value $is$ $$100?$

Use linear interpolation $to$ estimate the yield $to$ maturity for a bond with a face value

$of$ $$100,$ a coupon $of10\%,$ and $4$ years $to$ maturity. Its current price $is$ $$95.$

What $is$ the price $of$ a perpetuity that has a coupon $of$ $$50$ per year and a yield $to$

maturity $of2\mathrm{.}5\%?If$ the yield $to$ maturity doubles, what will happen $to$ its price?

$A10-$year, $7\%$ coupon bond with a face value $of$ $$1,000is$ currently selling for

$$871\mathrm{.}65.$ Compute the percentage return, and logarithmic return, $if$ you sell the bond

next year for $$880\mathrm{.}10.$

Calculate the duration $ofa$ $$1,000,6\%$ coupon bond with three years $to$ maturity.

Assume that all market interest rates are $7\%.$

A bond has a duration $of2\mathrm{.}83$ years, and the interest rate $is7\mathrm{.}0\%.$ Calculate the

expected price change $if$ interest rates drop $to6\mathrm{.}75\%$ using the duration

approximation.