At the beginning of the year, Shannon purchased a 3- year bond that pays an annual coupon of $7 and a principal of $100 after three years. The yield to maturity was 3%. At the end of the first year (after the payment of the coupon) the price was $100.

a. Calculate the investors holding period return.

b. Calculate the holding period return if the investor sold the bond right before the coupon payments. Note, the bond price is still $100 at the end of the first year.

c. What was supposed to be the price at the end of the first year (right after the payment of the coupon)?

d. Based on your answers in sections (a) and (c), is Shannons investment strategy successful? What contributed to her successful/poor performance?