a) On January 1, 2012 you purchased a $1,000 par, 10 year U.S. Treasury note with as semiannual coupon rate of 3%. If the bond is currently trading at $945.50, what is its yield to maturity (YTM)?
b) Consider two coupon bonds, each of which pays semiannual coupon payments and has 5 years left until maturity. The first bond has a coupon rate of 5% and the second bond has a coupon rate of 10%. Both bonds have a yield to maturity of 8%. By what percentage will the price of each bond change if its yield to maturity decreases from 8% to 6%?
c) A bond that matures in 8 years has a par value of $10,000, an annual coupon payment of $700; its market interest rate is 9%. What is its price?
d) Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000. Suppose that one year later the going rate drops to 6%. What is the new price of the bonds assuming that they now have 19 years to maturity?