A 20-year Canada bond with an 8% semi-annual coupon is currently selling at par ($1,000) and the probability distribution of its yield to maturity (YTM) a year from now is as follows:
State of Economy Probability YTM (%)
Boom .20 11.0
Normal Growth .50 8.0
Recession .30 7.0
a) Calculate the expected one-year holding period return (HPR)
b) If you invested $200,000 in these bonds, what would be your expected profit be if you sold the bonds at the end of year one?