An investor purchases a $10 million face amount of a corporate bond with remaining maturity of 10 years for 99 1/2 (no accrued interest). The coupon is 5%. The investor can invest cash at 2% annum, compounded semi-annually. The investor expects to sell the corporate bond in 5 years when yields are 4.50%.

(a) What is the future value of the coupon payments and reinvestment earnings at the time of the bond sale?

(b) What is the total cash from the bond sale, coupon payments and reinvestment earnings at the time of the bond sale?

(c) What is the total annualized rate of return, based on a semi-annual bond equivalent?