Consider a 10-year bond with an annual coupon rate of 5%. The bond pays coupon semiannually and is initially priced at par (the initial semiannual yield is 5%). We construct the following table to examine: How an 100 bps increase in semiannual yield affects the holding period return over different holding periods (a similar table is presented on page 57 of the slides of lecture 5). Please complete the table by filling in the blanks in row 16. Assume a flat yield curve and the reinvestment rate is equal to yield to maturity.

Sale Price Gain/Loss (5% vs 6%) Holding Period F a Semiannual Ba y=6% y=5% RI Sale Net Holding Reinvestment Income Period y=6% y=5% 1 1 5.000 5.000 2 2 10.300 10.250 3 15.918 15.763 y=6% -0.062 0.000 - 11.158 88.842 89.172 0.050 - 10.828 -0.003 100.000 100.000 100.000 100.000 100.000 -11.158 - - 10.778 - -10.322 -9.783 0.156 - 10.477 89.523 89.894 0.018 4 21.873 0.322 0.028 21.551 27.628 - 10.106 -9.712 5 28.185 90.288 0.557 -9.155 0.034 6 34.877 34.010 90.705 100.000 0.867 -8.428 0.039 -9.295 -8.853 7 41.969 40.710 91.147 1.259 -7.594 0.042 0.044 8 49.487 47.746 91.616 1.742 -8.384 -6.642 9 57.457 92.113 2.324 -7.887 -5.563 0.046 10 65.904 3.015 -4.346 0.047 11 74.858 55.133 62.889 71.034 79.586 88.565 97.993 0.048 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 12 92.640 93.198 93.790 94.418 95.083 95.788 84.350 94.411 -7.360 -6.802 -6.210 -5.582 -4.917 3.824 4.764 5.846 7.082 8.487 13 -2.977 -1.446 0.263 2.165 4.275 0.049 0.050 14 105.075 0.051 15 116.380 107.893 -4.212 0.051 16 17 141.064 129.202 97.327 100.000 11.863 -2.673 9.190 0.052 18 154.528 140.662 98.167 100.000 13.866 -1.833 12.033 19 168.800 99.057 16.105 152.695 165.330 100.000 100.000 -0.943 0.000 15.162 18.598 0.053 0.053 0.054 20 183.928 100.000 18.598