You get a call from a bank, offering you a great new investment product that you absolutely should not miss. They say that they will pay you $500 per year forever, if you agree to pay them $500 for only 10 years. That is, you contribute $500 every year for the next 10 years, and then you receive $500 in year 11, and every year thereafter. You are also told that this investment carries no risk; the payments are guaranteed. If the current market interest rate is 9% per year, do you think this is a wise investment? You are considering buying a bond with a coupon rate of 10% per year paid semiannually and a maturity of 3 years. Yield-to-maturity of this bond is 8% per year and the face value is $1000. a. Calculate the price of the bond. b. If you buy this bond today and sell it 6 months from now (right after the first coupon has been paid), what is your holding period return? c. If you buy this bond today (for the same price), but when you want to sell it in 6 months you see that the interest rates have s deny gone up to 10%, then what would your holding period return be? You have extracted the following set of forward rates from the yield curve: f_1=5%, f_2=7%, f_3=8%. Assume that expectations theory holds and realized rates will equal expected rates.| a. Find the price of a 3-year 6% coupon bond that makes annual payments and has face yalwaof $1000. b. Find the yield-to-maturity of a 3-year zero-coupon bond. c. If you buy the coupon bond in part a, and hold it until maturity what is the realized compound return you would earn? Compare this to the yield to maturity of the zero-coupon bond in part b