Exercise $2.$ Consider a $12$ percent $($annual$)$ coupon bond that matures in $3$ years, has a par value of $1000,$ and pays coupon semiannually. Suppose that currently this bond is available in the market for $1000.$ Suppose that your investment horizon is $1$ year and you expect that the market yield to maturity of this type of bond will decrease to $7\mathrm{.}5\%$ in $1$ year from now.

a$)$ Find, what will be the value of this bond in $1$ year from now considering the expectations outlined.

$(20$ points$)$

b$)$ Calculate the horizon yield from this bond considering the investment horizon and the expectations outlined.

$(20$ points$)$