Consider a coupon bond with C = 6, M = 100, and n = 20. Assume a flat spot curve, and y = .06

Assume a flat spot curve, and y = .06. Let r denote the reinvestment rate of the coupon payments. Let y' denote the interest rate at the time of sale. Also, assume your holding period to equal the Macaulay duration of the bond. Calculate the total future dollars at the end of the holding period under the following three scenarios:

(a) interest rates do not change: r = y' = y;

(b) interest rates increase: r = y' = y + 100 basis points;

(c) interest rates decrease: r = y' = y 100 basis points.