Consider a newly issued TIPS bond with a 3-year maturity, par value of $1,000, and coupon rate of 5.50%. Assume annual coupon payments. + Principal = Total repayment payment Inflation in Time year just ended 0 1 2 3 3.5% 2.5% 4.5% Par value $1,000.00 $1,035.00 $1,060.88 $1,108.62 Coupon payment $56.93 $58.35 $60.97 0 0 $1,108.62 What is the nominal rate of return on the TIPS bond in the first year? $ 56.93 $ 58.35 $1,169.59

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4) A 10 year bond with $50, 000 face value has semiannual coupon rate 4% and semiannual yield rate 2%. Fill out the following amortization table. Principle Outstanding t Payment Interest герaid Balance 1 2 3 12

Bond valuation-Semiannual interest Calculate the value of each of the bonds shown in the following table, all of which pay interest semiannually. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Bond A B C The value of bond A is $ Par Value $500 500 100 Coupon interest rate 9% 12 13 (Round to the nearest cent.) Years to maturity 10 15 5 Required stated annual return 10% 10 16

Using the following information, determine the maturity risk premium on 10 year bonds: Rate % inflation 0.74 T-bill 5.00 10y T-Bond 6.00 10y AAA Corporate 6.37 10y AA Corporate 7.62

Bond Coupon Rate (%) Number of Years to Maturity Price TII $884.20 $948.90 $967.70 $456.39 W X Y 7 8 9 0 5 7 4 10 Calculate the yield to maturity for the four bonds. SOLCE USING BA2 CALC.

A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What would be the bond's price in a. and b. if interest rates declined to 8 % ?