B4 A 10-year bond has just been issued in 2022 that pays a 2% coupon rate, the bond sells at par at issuance, the face value of the bond is 1. A 1-year bond in 2022 has a yield of 1%. (a) Explain that in general there are several reasons why the 10-year bond mentioned above would not sell at par in 2023. (b) Denote the price of this bond next year by P2%,9,2023 Argue that given the current surge in inflation it is likely that next year expected inflation will increase. An investor anticipating this increase in expected inflation will expect a lower value for E2022(P2%,9,2023). (6 points) (c) Assume now that according to investors' beliefs in 2022 the price for this 10-year coupon bond next year has a mean E2022(P2%92023) = 1.015 and a standard deviation o Pax,9.2023 0.08. Find the mean and standard deviation of the excess one-year-holding-period return of the 10-year coupon bond mentioned above. (d) Assume she can invest in a stock fund that she believes to have a mean return of 7%, stan- dard deviation of 20%, and a correlation of 0.6 with P2%.9,2023. All of the prices and returns mentioned until now in the question refer to nominal returns. The investor is considering to invest her wealth at a one-year horizon and she invests according to some mean-variance preferences about real portfolio returns in one year with a relative risk aversion of 3. Ex- plain why even if the 10-year bond is a fixed-income asset it is a risky asset for this investor. This investor believes with certainty that inflation during the rest of 2022 will be exactly 1%. Find the optimal choice of stocks, 10-year bond and 1-year bond for this investor in 2022.