1. A fixed-rate bond currently trades at 96% of par value and offers a coupon rate of 5% with coupon payments paid semiannually.

The bond’s yield to maturity is most likely to be:

A in the range between 2.60% and 5.21%.

B in the range between 5.00% and 5.21%.

C greater than 5.21%

2. A portfolio manager wants to assign a value to an illiquid Bond X with a coupon rate of 6%, with coupons paid semiannually, and a maturity of 5 years. Smith gathers data on comparable bonds whose prices and yields are readily available. Smith analysis leads him to conclude that bonds comparable to Bond X with 3-year and 6-year maturities have average yields to maturity of 6.10% and 7.30%, respectively.

Using matrix pricing, the value of Bond X per $100 of par value is closest to:

A $96.25.

B $97.06.

C $97.89.