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  3. (5pts) 4. a five-year bond has an 7.0% coupon rate

(5pts) 4. A five-year bond has an 7.0% coupon rate and a $1,000 face value....

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(5pts) 4. A five-year bond has an 7.0% coupon rate and a $1,000 face value. the yield to maturity on the bond is calculate the price of the bond assuming that the bond makes semiannual coupon payments. (5pts) 5. Suppose the real risk-free rate is 2.20%, the average expected future inflation rate is 1.50%, and a maturity risk premium of 0.10% per year to maturity applies, i.e.. MRP = 0.10%(t), where t is the number of years to maturity, hence the pure expectations theory is NOT valid. What rate of return would you expect on a 5-year Treasury security Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average. (5pts) 6. JR Industries has a bond outstanding with 30 years to maturity, an 6.0% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 5.50% nominal yield to maturity, but it can be called in 5 years at a price of $1,050. What is the bond's nominal yield to call (YTC)? 2

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