Decimal places (when relevant): please keep 2 in all calculations. For interest rates, keep 2 digits in the form of 3.xx% unless otherwise specified.

PLEASE SHOW ALL WORK! WITHOUT FINANCIAL CALCULATOR and NO EXCEL

If you are not going to answer all the parts to the question please leave it for someone else. THANKS

3. Suppose you purchase a ten-year bond with 6% annual coupons. You hold the bond

for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield

to maturity was 4.5% when you purchased and 7% when you sold the bond. What is

your annual rate of return on the bond in each of the following situations:

a. All coupons were immediately spent when received.

b. All coupons were reinvested in a bank account, which pays 2 percent interest until the bond is sold.