1) Which bond will have the highest price? a)    5 year, 6% Coupon, 6% Yield b)    10 year, 6% Coupon, 6% Yield c)    Neither d)    Cannot determine from information provided

 1) The correct option is c). Neither

Both the bond have equal price because the coupon rate is equal to yield to maturity.

a). We can calculate the price of bond by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of the bond

Rate = 6%

Nper = 5 periods

Pmt = coupon payment =1000*6% = 60

FV = 1000

Substituting the values in formula:

=-pv(6%,5,60,1000)

= 1000

b). We can calculate the price of bond by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of the bond

Rate = 6%

Nper = 10 periods

Pmt = coupon payment =1000*6% = 60

FV = 1000

Substituting the values in formula:

=-pv(6%,10,60,1000)

= 1000

So, the price of bond is equal to face value of bond.

2) We can calculate the yield to maturity by using the following formula in excel:-

=rate(nper,pmt,-pv,fv)

Here,

Rate = Yield to maturity (semiannual)

Nper = 16*2 = 32 periods (semiannual)

Pmt = Coupon payment = $1,000*6.25%/2 = $31.25

PV = $1,015.25

FV = $1,000

Substituting the values in formula:

= rate(32,31.25,-1015.25,1000)

= 3.05%

Yield to maturity = Rate * 2

= 3.05% * 2

= 6.10%