1. What is the annual coupon payment for a bond (par value of $1,000) with 7 years until maturity, a price of $1,000, and a discount rate of 6%?

a) $80

b) $70

c) $60

d) $50

e) None of the above

2. What happens to the price of a three-year bond with an 8% coupon when interest rates change from 6% to 8%?

a) A price increase of $53.47

b) A price decrease of $51.54

c) A price decrease of $53.47

d) No change in price

e) None of the above

3. What is the rate of return for an investor who pays $1,000 for a three-year bond with a 7% coupon rate and sells the bond one year later for $1,000?

a) 5%

b) 6%

c) 7%

d) 8%

e) none of the above