Suppose you purchase a 10 year 4% semi annual coupon bond for 78.681. You plan to

hold the bond until it matures and reinvest all coupons at the prevailing yield for bonds of

this risk level.

Immediately after you purchase the bond,

the yield for equi

valently risk

bonds decreases by 100 basis points

. What will be your return on this investment in this scenario

? Round your answer to

three decimal places.

4.

Same scenario as in Question 3 above. Suppose you purchase a 10 year, 4% semi annual coupon bond for 78.681. Immediately after you purchase the bond, the yield for

equivalently risk bonds decreases by 100 basis points. However, instead of holding the

bond until maturity, you plan to hold the bond for 2 years and then sell it. All coupons will

be reinvested at the prevailing yield on equivalently risky bonds. What will be your return

on this investment in this scenario? Round your answer to

three decimal places

.