1. Consider a 5% fixed-rate, 5-year, interest-only, loan of $100M. After 3 years from the origination, the market interest rate remains at 5%. What is the market value of the loan?

2. You are given the following information about two 10 year bonds. Both bonds have face amount 100 and coupons payable semi-annually, with the next coupon due in 1/2-year.

Bond 1: Coupon rate 4% per year, price 87.8.

Bond 2: Coupon rate 12% per year, price 133.77.

Find the annual effective yield rate for a 10-year zero-coupon bond

2.2%    

4.4%

4.7%

4.8%