1. Calculate the present value of a $1,000 zero-coupon bond with 8 years to maturity if the required annual interest rate is 12%.
2. A municipal and a corporate bond of equal risk, liquidity and maturity yield 6% and 10% respectively. For which values of marginal tax rates would you prefer to buy the municipal bond?
3. Calculate the duration of a $1,000, 5% coupon bond with three years to maturity. Assume that all market interest rates is 8% for next three years.