1. A $1000 face-value coupon bond has a 10% coupon rate, a maturity of 4 years, and a price of $960.
a. Is the yield to maturity going to be above or below 10%, and why?
b. Calculate the present value of the bond when interest rate is 12%. Must the yield to maturity be above or below 12%, and why?
c. Calculate the present value of the bond when interest rate is 8%. Must the yield to maturity be above or below 8%, and why?
d. Calculate the yield to maturity for this bond at the current price.
How many ratios of exchange would an individual have to cope with in a barter economy with 276 different items available for exchange?
How many absolute prices would there be if one of the items available for exchange were used as a generally acceptable medium of exchange?
Explain how the use of money as a unit of account can help reduce transaction costs in this economy. 2.