Answer the following.

An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of 1,000 dollars, and has a yield to maturity of 8.2 percent. Bond C pays an 11.5 percent annual coupon, while Bond Z is a zero coupon bond.

a. Assuming that the yield to maturity of each bond remains at 8.2 percent over the next 4 years, calculate the price of the bonds at each of the following years to maturity:

Years to Maturity	Price of Bond C	Price of Bond Z
4	________________	________________
3	________________	________________
2	________________	________________
1	________________	________________
0	________________	________________

b. Plot the time path of prices for each bond.

An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 12 years, while Bond S matures in 1 year. a. What will the value of each bond be if the going interest rate is 6%, 8%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 12 more payments are to be made on Bond L. b. Why does the longer-term bond’s price vary more than the price of the shorter-term bond when interest rates change?

Nungesser Corporation's outstanding bonds have a $\$ 1,000$ par value, a $9 \%$ semiannual coupon, $8$ years to maturity, and an $8.5 \%$ YTM. What is the bond's price?

An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:

$$\begin{array}{lcc} \mathrm{T} & \text { Price of Bond } \mathrm{C} & \text { Price of Bond } \mathrm{Z} \\ \hline 0 & - & - \\ 1 & - & - \\ 2 & - & - \\ 3 & - & - \\ 4 & -& - \end{array}$$

What is the value of a bond with a 4% coupon, 20 years to maturity, a par value of $1,000, and a yield to maturity of 5%?

Consider a bond selling at par ($100) with a coupon rate of 6% and 10 years to maturity.

What is the price of this bond if the required yield is 5%?

A portfolio manager is considering buying two bonds. Bond A matures in three years and has a coupon rate of 10% payable semiannually. Bond B, of the same credit quality, matures in 10 years and has a coupon rate of 12% payable semiannually. Both bonds are priced at par.

Suppose that the portfolio manager plans to hold the bond that is purchased for three years. Which would be the best bond for the portfolio manager to purchase?

Calculate for each of the following bonds the price per $1,000 of par value assuming semiannual coupon payments.

An investor has two bonds in his portfolio that have a face value of $\$ 1,000$ and pay an $11 \%$ annual coupon. Bond $\mathrm{L}$ matures in 12 years, while Bond $\mathrm{S}$ matures in 1 year.

Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change?

A 15-year annual coupon bond is priced at $984.56, the bond has a$1,000 face value and a yield to maturity of 6.5%. What is the coupon rate?

An investor has two bonds in his portfolio that have a face value of $\$ 1,000$ and pay a $10 \%$ annual coupon. Bond L matures in $15$ years, while Bond S matures in $1$ year.

a. What will the value of each bond be if the going interest rate is $5 \%, 8 \%$, and $12 \%$ ? Assume that only one more interest payment is to be made on Bond S at its maturity and that $15$ more payments are to be made on Bond L.

b. Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change?

Callaghan Motors's bonds have $10$ years remaining to maturity. Interest is paid annually; they have a $\$ 1,000$ par value; the coupon interest rate is $8 \%$; and the yield to maturity is $9 \%$. What is the bond's current market price?

Last year Joan purchased a $\$ 1,000$ face value corporate bond with an $11 \%$ annual coupon rate and a $10$-year maturity. At the time of the purchase, it had an expected yield to maturity of $9.79 \%$. If Joan sold the bond today for $\$ 1,060.49$, what rate of return would she have earned for the past year?

Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%. a. What is the yield to maturity at a current market price of (1)$865 and (2) $1,166? b. Would you pay$865 for each bond if you thought that a “fair” market interest rate for such bonds was 12%—that is, if $r_d$=12%? Explain your answer.