18. Consider a 15-year 7% coupon bond with a par value of $1,000 and semi-annual coupon payments. If an investor bought the bond at $769.40 and the yield to maturity is 10%. Assuming the reinvestment rate is the same as yield to maturity. 1) What is the interest on interest income at maturity? (5 points) 2) If the yield to maturity increases to 11% right after the purchase, what is the interest on interest income at maturity? (5 points) 3) If the yield to maturity increases to 11% right after the purchase, what is the capital gain/loss on this bond if the investor decided to sell after 5 years? Hint: Carrying value is the hypothetic price of the bond if the bond's yield remains at the initial yield, which is 10% in this problem. (6 points) 18. Consider a 15-year 7% coupon bond with a par value of $1,000 and semi-annual coupon payments. If an investor bought the bond at $769.40 and the yield to maturity is 10%. Assuming the reinvestment rate is the same as yield to maturity. 1) What is the interest on interest income at maturity? (5 points) 2) If the yield to maturity increases to 11% right after the purchase, what is the interest on interest income at maturity? (5 points) 3) If the yield to maturity increases to 11% right after the purchase, what is the capital gain/loss on this bond if the investor decided to sell after 5 years? Hint: Carrying value is the hypothetic price of the bond if the bond's yield remains at the initial yield, which is 10% in this problem. (6 points)