Valuation of Bonds

In a Word document, respond to the following. Number your responses 1–4. 1. Explain what a call provision enables bond issuers to do. Why would bond issuers exercise a call provision? 2. Define a discount bond and a premium bond. Provide examples of each. 3. Describe the relationship between interest rates and bond prices. 4. Describe the differences between a coupon bond and a zero coupon bond. supporting work leading to your solution to receive credit for your answer. Compute the following: 1. Assuming semi-annual compounding, what is the price of a zero coupon bond that matures in 3 years if the market interest rate is 5.5 percent? Assume par value is $1000. 2. Using semi-annual compounding, what is the price of a 5 percent coupon bond with 10 years left to maturity and a market interest rate of 7.2 percent? Assume that interest payments are paid semi-annually and that par value is $1000. 3. Using semi-annual compounding, what is the yield to maturity on a 4.65 percent coupon bond with 18 years left to maturity that is offered for sale at $1,025.95? Assume par value is $1000.