Fi473

1.

a) Face value = | $100.00 | |

Coupon rate = | 6% | |

Years to maturity | 10.00 | years |

| | |

Required Yield | Price | |

1% | $147.36 | |

2% | $135.93 | |

3% | $125.59 | |

4% | $116.22 | |

5% | $107.72 | |

6% | $100.00 | |

7% | $ 92.98 | |

8% | $ 86.58 | |

9% | $ 80.75 | |

10% | $ 75.42 | |

11% | $ 70.55 | |

12% | $ 66.10 | |

13% | $ 62.02 | |

14% | $ 58.27 | |

15% | $ 54.83 | |

16% | $ 51.67 | |

b)

Face value = | $100.00 | |

Coupon rate = | 6% | |

Years to maturity | 5.00 | years |

| | |

Required Yield | Price | |

1% | $124.27 | |

2% | $118.85 | |

3% | $113.74 | |

4% | $108.90 | |

5% | $104.33 | |

6% | $100.00 | |

7% | $ 95.90 | |

8% | $ 92.01 | |

9% | $ 88.33 | |

10% | $ 84.84 | |

11% | $ 81.52 | |

12% | $ 78.37 | |

13% | $ 75.38 | |

14% | $ 72.54 | |

15% | $ 69.83 | |

16% | $ 67.26 | |

c) The price of the bonds will decline as the required yields go up. When the years to maturity decrease, the slope of the ratio decreases, the line becomes more flat.

2. a)

Face value = | $100.00 |

Coupon rate = | 6% |

Required Yield | 8% |

| |

Time to Maturity | Price |

0 | $100.00 |

1 | $ 98.15 |

2 | $ 96.43 |

3 | $ 94.85 |

4 | $ 93.38 |

5 | $ 92.01 |

6 | $ 90.75 |

7 | $ 89.59 |

8 | $ 88.51 |

9 | $ 87.51 |

10 | $ 86.58 |

11 | $ 85.72 |

12 | $ 84.93 |

13 | $ 84.19 |

14 | $ 83.51 |

15 | $ 82.88 |

b)

Face value = | $100.00 |

Coupon rate = | 6% |

Required Yield | 4% |

| |

Time to Maturity | Price |

0 | $100.00 |

1 | $101.92 |

2 | $103.77 |

3 | $105.55 |

4 | $107.26 |

5 | $108.90 |

6 | $110.48 |

7 | $112.00 |

8 | $113.47 |

9 | $114.87 |

10 | $116.22 |

11 | $117.52 |

12 | $118.77 |...