12. You buy a 3-year Treasury note with a $1000 face value, a 1.625% annual coupon, and a yield to maturity of 1.609%. The Treasury note pays coupons semi-annually.

A. What is your 3-year holding period return if you hold the bond until maturity? Assume you can reinvest any coupons at the current yield to maturity of 1.609%. Hint: Calculate the HPR in semi-annual terms and then convert to an annual HPR using the following formula:

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B. What is your 2-year holding period return if you sell the bond after two years? Assume you can reinvest any coupons at the current yield to maturity of 1.609%.