1. You buy a $1,000 face value bond. It currently has a yield to maturity of 6.69 percent. The bond matures in three years and pays interest annually. The coupon rate is 7 percent. What is the current price of this bond?
2. You now have the bond described in question 1. One year past, and you received a coupon payment. The market interest rate(YTM) changed into 6%. What will be the price of the bond now?
3. Now consider the information in question 1 and 2. If you sell the bond at current price, what will be your holding period return?
A. 6.75%
B. 7%
C. 8.25%
D. 7.95%