5. Consider a 4-year zero-coupon bond priced such that its YTM is 7% per year. Assume the face value is $1000.

a. Determine the dollar price of the bond. (Enter the dollar price of the bond, such as 876.25 (without the dollar sign)). Do not enter the 32^nd conventional equivalent price.

b. Now assume that one year later interest rates have fallen and now the bond has a YTM of 5% (down from 7% one year earlier). What is the dollar price of the bond now? HINT: The price is not equal to $822.70.

c. If you purchased the bond for price computed in Part A and sold it one year later for the price computed in Part B, then what is the holding period yield? i.e. what is the holding period yield from t = 0 to t = 1? Enter your answer as a decimal, not as a percent.

d. With only one year remaining on the bond (i.e. at t = 3), the YTM on the bond is 10%. Compute the annualized effective holding period yield assuming you hold the bond from t = 1 (when it was, as described in Part B) to t = 3. Notice that this rate spans the two-year period from t = 1 to t = 3 but should be expressed as an effective annual value (in decimal form).

Enter the effective annualized holding period yield as a decimal, not as a percent, with at least 4 digits of precision.