Suppose you purchase a

$2525-$year

Treasury bond with a

$7\%7\%$

annual$$ coupon, initially trading at par. In

$1010$

$$years$\text{'}$ time, the$$ bond's yield to maturity has risen to

$9\%9\%$

$($EAR$).($Assume

$$$$100100$

face value$$ bond.$)$

a$.$ If you sell the bond$$ now, what internal rate of return will you have earned on your investment in the$$ bond?

b$.$ If instead you hold the bond to$$ maturity, what internal rate of return will you earn on your initial investment in the$$ bond?

c$.$ Is comparing the IRRs in

$($a$)$

versus

$($b$)$

a useful way to evaluate the decision to sell the$$ bond? Explain.