A 30-year maturity 10% coupon bond paying coupons semiannually is callable in 10 years at a call price of $1,200. The bond currently sells at a yield to maturity of 5%.

a) What is the selling price of the bond at present?

b) What is the yield to call?

c) Suppose that the investor decided to hold the bond only for 5 years. The reinvestment rate of coupon payments is 8.5%. The forecasted yield to maturity by the end of the investment horizon is 6%. i. What is the selling price of the bond at the end of the investment horizon if it will not be called? ii. What is the return on investment during the holding period?

d) Suppose that a 31-year maturity bond yields 5.05%. What is the forward rate for the thirtyfirst year?