The two bonds in question:

• Bond X: A zero coupon bond with a face value of $1,000 and exactly 8 years remaining that is selling for $560
• Bond Y: A 6% coupon bond with a face value of $1,000 selling for $650 with coupon payments made every 6 months. The last coupon payment was made yesterday, and the bond matures in 4 years, 6 months

1. Now assume that your fund buys both of these bonds today. You expect that interest rates will rise to 10% for both bonds in 2 years. If you sell at the end of 2 years (right after the coupon payment for Bond Y), what is the return on your investment, expressed as the effective annual rate?

***Please show work in Excel!!