The YTM on a bond is the interest rate you earn on your investment if interest rates dont change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

a.	Suppose that today you buy a bond with an annual coupon of 9 percent for $1,180. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b-1.	Two years from now, the YTM on your bond has declined by 1 percent and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b-2.

What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Use RATE function in EXCEL to find rate of return =RATE(nper,pmt,pv,fv,type) nper=number of periods=17 years pmt=annaul coupon=(coupon rate*face value)=(9%*1000)=90 pv=current price=1180 fv=face value=1000 =RATE(17,90,-1180,1000,0)=7.14% Rate of return=7.14% b. 1. Use PV function in EXCEL to find the price of the bond =PV(rate,nper,pmt,fv,type) rate=7.14%-1%=6.14% nper=number of periods=17-2=15 years pmt=annual coupon=90 fv=face value=1000 =PV(6.14%,15,90,1000,0)=1275.41 Price of the bond after 2 years=$1275.41 2. HPY=(After 2 year bond price-current bond price+(2*coupons))/current bond price=(1275.41-1180+180)/1180=23.34% HPY was wrong if you can contact it with an explanation of the method please