$1.$ The YTM on a bond is the interest rate you earn on your investment if interest rates do not change. If you sell the bond before it matures, your realized return is called a holding period yield $($HPY$).$

a$.(5$ pts$.)$ Suppose you buy a bond with an annual coupon rate of $7\%$ for $$1,050.$ The bond has $17$ years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $$1,000.$

Two $(2)$ years from now, the YTM on your bond declines by $1$ percent, and you decide to sell.

$.)$What price will your bond sell for?

i$.$ What is the HPY on your investment?

ii$.$ Why are the HPY $($calculated in ii$.)$ and the YTM $($when you first bought the bond$)$ different?