Problem 2: Consider a 10-year bond that pays a 5 percent coupon semi-annually with a face value of $1000.

a. What is the price of this bond if the annualized yield to maturity of 4 percent (i.e. the stated rate is .04 compounded

semi-annually)?

b. What is the price of this bond if the annualized yield to maturity of 5 percent (i.e. the stated rate is .05 compounded

semi-annually)?

c. What is the price of this bond if the annualized yield to maturity of 6 percent (i.e. the stated rate is .06 compounded

semi-annually)?

d. What is the price of this bond if the annualized effective rate is 5 percent?

Problem 3: Consider the bond described in Problem 2 above but let the coupon be paid annually. Answer questions a through c in Problem 2 above for this

annual coupon paying bond.