Assume an investor with a 5-year investment horizon is considering purchasing a 7-year 6% coupon bond selling for $100 (par value is also $100). Over the investment horizon, the investor expects to reinvest the coupons at 5%. At the end of the investment horizon, the investor expects the yield to maturity to be 4% for the rest of the life of the bond.

27) How much reinvestment income (interest-on-interest) is generated by the coupons over the investment horizon?

A) $330.61

B) $33.61

C) $3.61

28) How much does the investor expect to be able to sell the bond for at the end of the investment horizon?

A) $100.00

B) $103.81

C) $160.00

29) What is the expected annual total return on this bond, given the investors assumptions?

A) 6.46%

B) 5.46%

C) 4.46%

30) What would be the total return on this bond if the investor had a 7-year investment horizon and bought the bond when it was issued at par and held it for 7 years?

A) 6%

B) 5%

C) 4%