You purchase a bond today for $900 that has a 5% coupon rate,paid semi-annually, and has 10 years to maturity. The face value ofthe bond is
$1,000. One year later you sell the bond for $1,020
a) Calculate the Holding Period Return (HPR) (in %) over the oneyear that you held the bond. (8)
b) Do you think interest rates increased or decreased over theone year period that you held the bond? Explain briefly. (5)
