QUESTION 1- The Bond Market (20 Marks) [CLO 3] a) A bond portfolio manager is contemplating the purchase of a corporate bond with the following characteristics A coupon rate of 11% 4 years remain until maturity The current price of the bond is $98.4321 with a yield to maturity of 11.50% The treasury yield curve is flat at 8.0% The credit spread for the issuer is 350 basis points at all maturities What is the total effective return on this investment, assuming a 1-year investment horizon, a coupon reinvestment rate of 6%, no change in treasury yield curve at the horizon date and a 250 basis point decline in the credit spread for all maturities at the horizon date? (8 marks)