1. If the volatility of soybean prices increases, what do you think will happen to the price of call options on soybeans? Explain. What would happen to the price of put options for soybeans? Explain.
2. Commonwealth company has a 10% coupon bond with a par value of $1000. The current yield to maturity on new bonds is 8%. If interest is paid annually and the bond matures in 5 years, what is the price of Commonwealth bonds?