1) You purchase today a non-callable semi-annual coupon rate bond under the following conditions: Bond characteristics:

Coupon rate: 5.0%

Maturity of bond: 12 years

Current YTM: 6.5%

Expect hold assumptions:

Expected hold period: 7 years

Reinvestment rate (average money market return): 3.5%

Expected YTM at sale: 5.0%

Based upon the above items, find the Horizon Yield (HY) for this bond position.

Please show work! (not excel)