Use the following information to answer questions 1 through 4:

Assume an investor with a 5 year investment horizon is considering purchasing a 7 year maturity, 6% coupon bond selling at par ($100). The bond pays interest semi-annually. The investor expects to reinvest the coupons at 5% and the bond will be selling to offer a yield to maturity of 4% in five years.

1. How much reinvestment income is generated by the coupons over the investment horizon?

1. $3.61

2. $4.39

3. $30

4. $33.61

5. $34.39

B. How much does the investor expect to be able to sell the bond for at the end of the investment horizon?

1. Par

2. $137.42

3. $103.81

4. $108.84

C. What is the expected total return for this bond at the end of the investment horizon?

1. $137.42

2. 3.23%

3. 4%

4. 5%

5. 6.46%

D. If the investor expected to reinvest the coupons at 6% over the five year investment horizon, would the total return be equal to the yield to maturity?

1. Yes

2. No

3. If the bond was priced at a premium

4. Not enough information