(calculating the present value of a bond) If a corporate bond with a face value of $1,000 has 12 years to go until it matures, has a coupon interest rate of 8% and a yield to maturity (YTM) of 9%, what should be its price in the bond market (ie, PV)?

5. (calculating the current yield of a bond) If a corporate bond with a face value of $1,000 has 12 years to go until it matures, has a coupon interest rate of 8% and a market price of $928.39, what is its current yield?

6. (calculating the YTM of a bond) If a corporate bond with a face value of $1,000 has 12 years to go until it matures, has a coupon interest rate of 8% and a market price of $928.39, what is its yield to maturity (YTM)?

7. (calculating the YTC of a bond) Assume a callable corporate bond with a face value of $1,000, a coupon interest rate of 8%, a market price of $928.39, and a call premium of 9%. Assume also that the bond 12 years to go until it matures, but it is callable after 7 years. What is the bond’s yield to call (YTC)?

8. (calculating the present value of a bond with semi-annual coupon interest payments) If a corporate bond with a face value of $1,000 has 8 years to go until it matures, has a coupon interest rate of 10%, paid semiannually, and has a yield to maturity (YTM) of 8.5%, what should be its price in the bond market (ie, PV)?

9. (calculating the YTM of a bond with semiannual interest payments) If a corporate bond with a face value of $1,000 has 8 years to go until it matures, has a coupon interest rate of 10%, paid semiannually, and has a market price of $1,085.80, what is its yield to maturity (YTM)?

10. Define the following terms as they apply to interest rates:

a. The real risk-free rate (r*)

b. The nominal risk-free rate (Rrf)

c. The inflation premium (IP)

d. The default risk premium (DRP)

e. The liquidity premium (LP)

f. The maturity risk premium (MRP)

11. Assume the real risk-free rate is 1%. Assume also that inflation is expected to be 2% in the coming year (year 1), 3% in the next year after that (year 2), and 2% in the year after that (year 3). Assume also that the default risk premium, the liquidity premium, and the maturity risk premium are 0%. Given these conditions, what would be the yield on three-year treasury bonds today?

5. (calculating the current yield of a bond) If a corporate bond with a face value of $1,000 has 12 years to go until it matures, has a coupon interest rate of 8% and a market price of $928.39, what is its current yield?

6. (calculating the YTM of a bond) If a corporate bond with a face value of $1,000 has 12 years to go until it matures, has a coupon interest rate of 8% and a market price of $928.39, what is its yield to maturity (YTM)?

7. (calculating the YTC of a bond) Assume a callable corporate bond with a face value of $1,000, a coupon interest rate of 8%, a market price of $928.39, and a call premium of 9%. Assume also that the bond 12 years to go until it matures, but it is callable after 7 years. What is the bond’s yield to call (YTC)?

8. (calculating the present value of a bond with semi-annual coupon interest payments) If a corporate bond with a face value of $1,000 has 8 years to go until it matures, has a coupon interest rate of 10%, paid semiannually, and has a yield to maturity (YTM) of 8.5%, what should be its price in the bond market (ie, PV)?

9. (calculating the YTM of a bond with semiannual interest payments) If a corporate bond with a face value of $1,000 has 8 years to go until it matures, has a coupon interest rate of 10%, paid semiannually, and has a market price of $1,085.80, what is its yield to maturity (YTM)?

10. Define the following terms as they apply to interest rates:

a. The real risk-free rate (r*)

b. The nominal risk-free rate (Rrf)

c. The inflation premium (IP)

d. The default risk premium (DRP)

e. The liquidity premium (LP)

f. The maturity risk premium (MRP)

11. Assume the real risk-free rate is 1%. Assume also that inflation is expected to be 2% in the coming year (year 1), 3% in the next year after that (year 2), and 2% in the year after that (year 3). Assume also that the default risk premium, the liquidity premium, and the maturity risk premium are 0%. Given these conditions, what would be the yield on three-year treasury bonds today?

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