How much would you pay for a perpetual bond that pays an annual coupon of ​$80 per year and yields on competing instruments are 20​%?   You would pay $. ​(Round your response to the nearest penny.​) Part 2 If competing yields are expected to change to 8​%, what is the current yield on this same bond assuming that you paid ​$400?   The current yield is ​%. ​(Round your response to the nearest​ integer.) Part 3 If you sell this bond in exactly one​ year, having paid ​$400, and received exactly one coupon​ payment, what is your total return if competing yields are 8​%?   Your total return is ​%. ​ (Round your response to two decimal places.​)

Please show work without calc or excel. In other words the actual equation.

Suppose that you want to construct a 2-year maturity forward loan commencing in 3 years. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $ 996.04 895.89 833.92 772.80 675.18 Required: a. Suppose that you buy today one 3-year maturity zero-coupon bond with face value $1,000. How many 5-year maturity zeros would you have to sell to make your initial cash flow equal to zero (specifically, what must be the total face value of those 5-year zeros)? b. What are the cash flows on this strategy in each year? c. What is the effective 2-year interest rate on the effective 3-year-ahead forward loan? d. & e. Confirm that the effective 2-year forward interest rate equals (1 + f4) ×(1 + f5)-1. You therefore can interpret the 2-year loan rate as a 2-year forward rate for the last two years. Alternatively, show that the effective 2-year forward rate equals (1 + y5) 15 + (1+y3) ³. - 1

You are considering investing in a 20% coupon rate bond with the annual coupons, a three-year majority and a face value of $1000. You observe the following prices for discount or zero - coupon bonds with face value of $100 (STRIPS): Time to maturity 1 year 2 Years 3 Years Price 96.71 92.21 84.47 (a) What is the fair market price of the bond? (b) What is the yield to maturity of the bond? (c) What is the yield to maturity on the one-year STRIP? (d) What is the yield to maturity on the two-year STRIP? (e) What is the yield to maturity on the three-year STRIP? (f) What does the market expect the 1 year to be in 1 year from now? (g) What does the market expect the 1 year to be in 2 years from now? (h) What does the market expect the 2 years to be in 1 year from now?