Calculate and complete the tables for the following $3$ holding period scenarios $(5,11\mathrm{.}5,$ and $27$ years$)$ assuming any coupons are invested at the new yield $($i$.$e$.,$ the $100-$basis point increase$)$ and the bond is sold at this new yield. Further assume semiannual compounding for the reinvestment of any cash flows.

a$.$ Quantify the price and reinvestment risks for the holder of the bond for this increase in rates.

b$.$ Quantify the net risk for the increasing rate scenario.

c$.$ Find the holding period returns under the scenario of an immediate interest rates increase from $9\%$ to $10\%.$

Price and Reinvestment

Bond: $8\mathrm{.}5\%$ Coupon$$Compounded Semiannually

$$100$ FACE Value

Yield $9\%$

$40$ years until maturity

Price $$94\mathrm{.}6087$

Duration $11\mathrm{.}3178$

Convexity $216\mathrm{.}6740$