Suppose that today you buy a coupon bond with an annual coupon payment of $90. The bond costs you $1,000 and its face is $1,000. The bond has 12 years to maturity.

1) What is the coupon rate? What is the yield to maturity on the bond at the time of purchase?

2) Consider that 3 years from now, the yield to maturity becomes 7 percent and you decide to sell. What is the price of the bond at which you can sell it for? (Round you answer to 2 decimal places.)

3) Define the holding period yield as the realized return if you actually sell the bond before it matures. Letr*be the holding period yield,Tbe the number of holding periods,Cbe the coupon payment and, P₀and P_Tbe the price at the beginning and the end of the holding period, then it follows thatP₀= {C[1-1/(1+r*)^T]}/r*+P_T[1/(1+r*)^T].Based on the assumptions inquestion2),whatisyour holding period yield? (Round your answer to 2 decimal places.)