5. Bond E: 12% CouponCompounded Semiannually $100 FACE Value Yield 10% 28 years until maturity Holding period 12 years

a. What is the original price of the bond?

b. Quantify the price and reinvestment risks for the holder of the bond if rates increase 1%.

c. Quantify the net risk for the increasing rate scenario.

d. Find the average annual holding period return under the scenario of interest rates increasing immediately and assuming any cash-flows received can be reinvest at the new interest rate.

	Yield Increase	Yield Decrease
	Expected	Actual	Expected	Actual
Coupon/period ($)
Maturity (periods)
Yield/period
Holding period
Price
Reinvestment
HPR(total)
HPR(effective, annual)
HPR(BEY)
Price (0)