1. Consider an 8% 30 year U.S. Treasury Bond which was just issued at par and which pays semiannual coupons of 4% every six months. Compounding on such a bond is semiannual. Perhaps paradoxically, the yield to maturity on such a bond that is printed in the paper is defined as the semiannual yield (the yield over six months, in percent) multiplied by two.
   1. Suppose after six months, the yield on the bond (that is printed in the paper) falls to 7%. Suppose it then stays at 7% for another six months. Suppose further that you can reinvest the coupon that you get after six months at the new yield to maturity for six months. What is your one-year holding period return on the bond?