Q. Suppose you buy a 30-year, 7.5% (annual payment) coupon bond when its yield to maturity is 7.67% and you plan to hold it for 20 years. Your forecast is that the bonds yield to maturity will be 8% when it is sold and that the reinvestment rate on the coupons will be 6% for the first 10 years and 7% for the next 10 years.

a. What is the initial price of the bond when you buy it?

b. What will be the sales price of the bond after 20 years?

c. What will be the realized compound return?