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

2. 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

3. 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%

4. 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