III. Finally, John buys 10 FCL bonds at PAR value ($1,000 each) with a coupon rate of 8%, paid 2% per quarter. The bonds are callable with a call premium of 5% of the face amount.

On March 31^st, exactly of a year later, FCL calls the bonds even though theres 20 years remaining to maturity. At the time the bonds are called, the Yield-To-Maturity has dropped to 7% (FCL calls the bonds to take advantage of the lower rates in the marketplace so it can pay less interest over the long term).

[NOTE: You must adjust the N, I/Y, and PMT when the coupon is not paid annually. In this case, N= 20 x 4 = 80, I/Y = 7/4 = 1.75, and PMT = 8% x 1,000 = $80 / 4 = 20.]

HPR = $ ______

HPR = _______ % (be sure to annualize your calculation)

IV. John decided to reinvest the funds from part III on April 1, 20x8. He buys 11 bonds issued by FCL for $1,000 each with a coupon rate of 7% (paid 1.75% quarterly).

John sells these bonds on December 31, 20x9 (exactly 9 months after purchase). The Yield to Maturity has dropped further to 5%. When John sells these bonds, they have exactly 20 years to maturity remaining.

HPR $ = ____________

HPR = ___________% (be sure to annualize your calculation)