2. Suppose that an investor has 14 years investment horizon. The investor is considering a 24-year semi-annual coupon bond selling at par and having a coupon rate of 9%. The investor expectations are as follows: The first 5 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an annual interest rate of 8%; The next 7 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an annual interest rate of 8.5%; The last 16 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at a 8.75% annual interest rate. The investor also expects that the market interest rate (or the discount rate) on 10-year similar-credit-quality bonds at the end of her investment horizon will be 9%. (a) What is the total return on bond equivalent basis? (b) What is the total return on effective rate basis? 2. Suppose that an investor has 14 years investment horizon. The investor is considering a 24-year semi-annual coupon bond selling at par and having a coupon rate of 9%. The investor expectations are as follows: The first 5 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an annual interest rate of 8%; The next 7 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an annual interest rate of 8.5%; The last 16 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at a 8.75% annual interest rate. The investor also expects that the market interest rate (or the discount rate) on 10-year similar-credit-quality bonds at the end of her investment horizon will be 9%. (a) What is the total return on bond equivalent basis? (b) What is the total return on effective rate basis