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5) (5 pts) You buy a $1000 face value bond today (year 2021)with a 5% coupon paid semi-annually that is priced to yield 4.6% per

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5) (5 pts) You buy a $1000 face value bond today (year 2021)with a 5% coupon paid semi-annually that is priced to yield 4.6% per year compounded semi-annually. The bond matures in 10 years (in the year 2031) and sells for $1031.78 today. a) What will the bond sell for in 2 years, if the YTM remains at 4.6% per year compounded semi-annually? Price in 2 years if interest rates remain constant =$_ b) What will the bond sell for in 2 years (year 2023) if interest rates drop, and the YTM on this bond is 4.2% per year compounded semi-annually in two years Price if interest rates drop =$ c) What is your realized yield if you buy the bond today (year 2021) and sell the bond in 2 years (after the coupon payment has been made) if interest rates have dropped and the YTM is 4.2% compounded semi-annually. (ignore reinvestment risk but don't forget about the coupon payments) Realized yield = %

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