You attempt to finance a 6-year guaranteed investment contract (GIC). The payment made by the policyholder is $10 million. Suppose the promised annual interest rate of the GIC is 10%.The bond you want to use is a 6-year, 10% annual coupon rate bond (semi-annually paid). Its face value is $10 million and you bought at par.Suppose the new interest rate in the 6-year life of GIC is 12%. Answer the following questions:

1. What is the promised payment of the GIC?

2. Calculate the total return of investing in the bond.

3. Is the strategy (investing in a 6-year bond) working? Why?