You are a bond portfolio manager. Your objective is to maximize return, while staying fully invested in bonds (you have to own one or the other, regardless of what you think of the direction of interest rates). You are comparing two bonds. Both are annual pay, and rated A:

1. 	YTM
   1,000 HON 4.50% of 2029	4%
   1,000 DE 3.50% of 2029	4%

3. You plan to sell the bonds in one year. Suppose exactly one year passes, and rates are unchanged (so in other words, you would buy them at the price from Part a, and would sell them a year later at the same YTM).
5. A. Calculate the sale price of both bonds in one year. Show your work
7. B. Calculate the expected total return for the one-year holding period for both bonds, if rates dont change. Show the price return and current yield (income return) separately, and then add them for to total return.
9. C. Explain the relationship you found between the YTM and the expected return. (In other words, why is the YTM bigger, smaller, or equal to the expected return?)
11. D. You are anticipating rising interest rates. Calculate the price return for the two bonds that would result from an immediate 100 basis point increase in rates (assume no time passes, just +1.0% right after you buy the bond today).
13. E. State which bond you would buy if you were anticipating an increase in rates of 100 basis points immediately after your purchase (remember, you are a bond manager, so you must own one of the bonds, but your objective is to maximize return).