Suppose you purchase a 30-year Treasury bond with a 7% annualcoupon, initially trading at par. In 10 years' time, thebond's yield to maturity has risen to 6% (EAR). (Assume $100 face valuebond.)

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

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

c. Is comparing the IRRs in (a) versus (b) a useful way to evaluate the decision to sell thebond? Explain.