Code	Coupon		Face value		Maturity (years)	Zero-Coupon Yields	Coupon Payment	YTM semi annually	Bond Price
GSBE47	3.00%	10.00	100		10.0	3.280%	1.5	1.59%	$98.4948

Suppose you decide to invest in treasury bond GSBE47 for 5 years. Assume coupons can be reinvested at the current YTM of the bond, compute your holding period return (HPR) p.a. (semi-annually compounded) if the YTM increases by 0, 25, 50, 75 and 100 basis points (bps), and if the YTM decreases by the same amount at the end of year 5 when you sell the bond. Plot the relationship between HPR and changes in the YTM and comment on your results.

(b) Repeat part (a) assuming you now decide to also short-sell treasury bond GSBG25 with 5 years to maturity to fund your investment in treasury bond GSBE47.

(c) Repeat part (a) assuming the YTM of the bond remains the same, instead the reinvestment yield of the coupons increases/decreases by 0, 25, 50, 75, and 100 bps. Plot the relationship between HPR and changes in the reinvestment yield.

Treasury Bonds					Term-structure of Interest Rates
Code	Coupon		Face value		Maturity (years)	Zero-Coupon Yields	Coupon Payment	Bond Price
GSBG25	3.25%	5.00	100		5.0	2.615%	1.625	$101.1846