Response to the following questions:
1. If you determine that the yield-to-maturity on a bond with annual coupons is 10%, what rate of return are we assuming that these coupons earn when they are reinvested?
2. Consider a bond with a face value of $1,000, a coupon rate of 8% (paid annually), and a maturity in three years. What is the value of the bond if it is priced to yield 6%?