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1. Answer the following independent questions. No points are given without showing calculation steps or giving detailed explanation.

1. You purchased a default-free 5-year semi-annually paid coupon bond 1 year ago. Its coupon interest rate was 6%, and its par value was $1,000. At the time you purchased the bond, the yield to maturity was 4%. If you have reinvested the interest payments with a rate of 4% and you sold the bond with the bond's yield to maturity changed to 3%, what is your rate of return on holding the bond over the past 1 year?

2. The yield curve obtained from 3 default-free zero-coupon bonds, A, B, C, with par value of $1,000 is as follows. You purchase one bond B and one bond C today. Assume that the pure expectations hypothesis of the term structure is correct. What is your rate of return on holding the bonds for two years?

Bond	Years to Maturity	Yield to Maturity
A	1	4%
B	2	6%
C	3	8%

You purchased a 5-year corporate bond 2 year ago. Its coupon interest rate was 8% with interest paid annually, and its par value was $1,000. The market price was $750 based on the expectation that you may on average receive 70% of the par value. The yield curve was perfectly flat in which the market interest rate remained the same as the expected YTM until now. Assume that the reinvestment can be made at the market interest rate. Today, due to a negative shock by a global pandemic accompanied by a bailout monetary policy, investors now expect to receive 30% of the par value and the market interest rate for the following three years has declined by 1%. What is the holding period return of this bond over the past two years if you close the position now?

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