7. You want to have $1 million in real dollars in your bank account when you retire in 35 years. The nominal retum on your investment is 9% and the expected inflation rate is 3.8%. You will deposit a fixed amount of money into your account every year starting one year from now. What real amount must you deposit each year to achieve your goal? (2 marks) 8. a) Consider Bond C-a 4% coupon bond that has 10 years to maturity. It makes semi-annual payments and has a YTM of 7%. If interest rates suddenly drop by 2%, what is the percentage change of the bond? What does this problem tell you about the relationship between interest rate and bond price? (2 marks) b) Consider another bond - Bond D, which is a 10% coupon bond. Similar to Bond C, it has 10 years to maturity. It also makes semi-annual payments and have a YTM of 7%. If interest rates suddenly drop by 2%, what is the percentage change of the bonds? Comparing the percentage change of bond C and bond D, what does this tell you about the interest rate risk of bonds with higher coupon rates? (2 marks)