Question: I need help solving part b really badly Consider a 10-year, risk-free bond with a coupon rate of 5% (annual coupons) and a face amount

I need help solving part b really badly

Consider a 10-year, risk-free bond with a coupon rate of 5% (annual coupons) and a face amount

of $1,000.

a.

What is the YTM on the bond if its price is $1,100?

b.

What is the annual HPR if you buy the bond for $1,100, hold the bond for 5 years, sell it

(immediately after the payment of the time 5 coupon) at a price corresponding to a YTM

of 4%, and reinvest the intermediate coupons (over the first 5 years) until time 5 at a rate

of 3%?

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