1. A 10-year maturity mortgage-backed bond is issued. The bond is a zero-coupon bond that promises to pay $10,000 (par) after 10 years. At issue, bond market investors require a 15 percent interest rate on the bond. What is the initial price on the bond? (A)
(A) $2,252
(B) $2,472
(C) $8,696
(D) $10,000
2. A 25-year maturity mortgage-backed bond is issued. The bond has a par value of $10,000 and promises to pay an 8 percent annual coupon. Assume that 20 years after the bond is issued, bond market investors require a 15 percent interest rate on the bond. What is the market price of the bond? (C)
(A) $6,835
(B) $6,863
(C) $7,653
(D) $14,270