1. Explain why the yield of a bond that trades at a discount exceeds the bond’s coupon rate.
2. Explain the relationship between interest rates and bond prices.
3. Why are longer-term bonds more sensitive to changes in interest rates than shorter-term bonds?
4. Explain why the expected return of a corporate bond does not equal its yield to maturity
1. What is the price per $100 face value of a two-year, zero-coupon, risk-free bond?
2. What is the price per $100 face value of a four-year, zero-coupon, risk-free bond?
3. What is the risk-free interest rate for a five-year maturity?