posted by ali on .
Assume an investor with 5 years investment horizon is considering purchasing a 7 years 6% coupon selling at par. The investor expects to reinvest the coupon at 5% and that the bond will be selling to offer a yield to maturity of 4% in five years. What is the expect total return for this bond? Express your answer on a bond-equilent basis and on an effective annual rate basis.