QUESTION 13 In finance, we know that IRR (internal rate of return) is the discount rate that makes the present value of all future cash flows equal to the intial investment cost. The YTM is the interest rate you earn on a bond if you hold the bond to its maturity (Yield to Maturity). In essence, YTM is the IRR expressed like an APR. If you actually sell the bond before it matures, your realized rate of return on the bond investment can be measured in IRR too. (The rate of return on bond investments are usually quoted like YTM.) Requirement 1: Suppose that today you buy an annual coupon bond with a coupon rate of 7 percent for $875. The bond has 10 years to maturity. If you hold the bond to its maturity, what rate of return (YTM) do you expect to earn on your bond investment? (Do not round intermediate results. Round your answer to this question to 2 decimal places.) Rate of return % 2: Two years from now, the market interst rate of the bonds like your bond has declined by 1 percent. You sell your bond then. (a) What price will your bond sell for? (The result from the previous question is an intermediate result. Do not round intermediate results. Round your answer to this question to 2 decimal places.) Bond Price (b) What is the rate of return on your investment of bond? (The result from the previous question is an intermediate result. Do not round intermediate results. Round your answer to this question to 2 decimal places.) Rate of Return %