Question: 3. (20 Points) Metropolis has been planning to develop a new warning system to make Superman aware of significant dangers. The installation of the system

3. (20 Points) Metropolis has been planning to develop a new warning system to make Superman aware of significant dangers. The installation of the system costs more than what their budget allows so the mayor decides to issue a 25-year bond to finance the project. Each bond has a face value of $1,000 and it promises a coupon rate of 5%, which will be paid semi-annually. a. (4 Points) Calculate the price of this bond if the Yield to Maturity (YTM) is 6.0% pa. b. (10 Points) Let's assume you bought this bond on the date of issue. Right after receiving the fourth coupon payment (i.e., two years later), you decided to sell the bond. Exactly on that date, the YTM decreased to 5.2%. Under these circumstances, what is your holding period return? c. (6 Points) What is the percentage change in the price on the day of selling this bond (due to YTM change)? (Please submit your answer in three decimals such as 15.233% )

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