Consider a $2-$year, risk$-$free bond with a coupon rate of $6\%($annual coupons$)$ and a face

amount of $$1,000.$

a$.$ What is price of this bond if the YTM is $5\%?6\%?7\%?$

b$.$ What is the YTM if the price is $$980?$ $$1,000?$ $$1,020?$

c$.$ If you buy the bond for $$980,$ hold it to maturity and you reinvest the coupon

payment at $6\%,$ what is the annualized HPR on your investment?

d$.$ If you buy the bond for $$1,000(YTM=6\%),$ then the yield increases to $7\%,$ and

you sell the bond immediately after the first coupon payment, what is your HPR$?$

e$.$ You buy the bond for $$1,000(YTM=6\%),$ then the yield increases to $7\%,$ and

you sell the bond immediately after the first coupon payment. If you take the

proceeds from the sale plus the coupon payment and buy a $1-$year, zero$-$coupon

bond with a yield of $7\%,$ what is your annualized HPR over the $2-$year period?