Problem 7. (9 marks)

Three years ago, you purchased a 30 year, $1,000 par value bond for a quoted price of 95.0. The bond pays its 5% coupon semi-annually.

a)If the present market rate on identical bonds is 4%, at what price should the bond trade today? (3 marks)

a)If you sell your bond today for the price you calculated above, what is your EFFECTIVE ANNUAL HOLDING PERIOD RETURN over the 3-year period? (6 marks)

Please show the calculation formula, do not use the excel formula to get the answer