The YTM on a bond is the interest rate you earn on yourinvestment if interest rates don’t change. If you actually sell thebond before it matures, your realized return is known as theholding period yield (HPY). a. Suppose that today you buy a bondwith an annual coupon rate of 12 percent for $1,070. The bond has12 years to maturity. What rate of return do you expect to earn onyour investment? Assume a par value of $1,000. (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.) b-1. Two years from now,the YTM on your bond has declined by 1 percent, and you decide tosell. What price will your bond sell for? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) b-2. What is the HPY on your investment? (Donot round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.)
a.Expected rate of return%?
b-1.Bond price?
b-2.HPY%?
