Use the Excel file (Problem 1) to calculate how bond prices vary over time when the YTM is held constant at three different levels (YTM=5%, 10%, and 15%) or when the YTM changes randomly over time (i.e., the future interest rate varies over time). Answer the following five questions. (5 points for each of the columns of pricing formulas in the Excel file; 5 points for each of the following five questions; 50 points in total)

1) When YTM = Coupon Rate, does the bond price increases/decreases/remains unchanged over time?

2) When YTM > Coupon Rate, does the bond price increases/decreases/remains unchanged over time?

3) When YTM < Coupon Rate, does the bond price increases/decreases/remains unchanged over time?

4) Note that YTM=5% and YTM=15% are deviating from YTM=10% by the same amount, 5%. Are the price trajectories for YTM=5% and YTM=15% symmetric about the price trajectory for YTM=10%? Why is so?

5) What is the expected holding period return from 1/1/2019 to 1/1/2020 if we believe that the YTM happen to be 0.08 and 0.05 on those two days (highlighted in green)? Dont forget the coupon payment in your HPR calculations