1. (40 points—10 points for each part)

Calculate the price of the following bonds, where F is the face value, c is the coupon rate, N is the number of years to maturity, and i is the interest rate (or discount rate, or yield):

a. F = $100, c = 10%, N = 2, i = 8%

b. F = $10,000, c = 6%, N = 3, i = 9%

c. F = $1,000, c = 0%, N = 10, i = 6%

d. F = $10,000, c = 7%, N → ∞ (bond never matures), i = 6%

2. (60 points—20 points for each part)

Calculate the yield on the following bonds:

a. PB = $100.95, F = $100, c = 6%, N = 1

b. PB = $712.99, F = $1,000, c = 0%, N = 5

c. PB = $1,176.47, F = $1,000, c = 10%, N → ∞ (bond never matures)

 
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