A 30-year maturity bond has a 5.8% coupon rate, paid annually. It sells today for $882.42. A 20-year maturity bond has a 5.3% coupon rate, also paid annually. It sells today for $898.1. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 6.8% and 15-year maturity bonds will sell at yields of 6.3%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 6.3%.

a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period.

30 Year Bond = _______%

b. What is the (annualized) expected return of the 20-year bond?

20 Year Bond = _______%