1. Calculate the HPY on a bond that is currently selling for 103-25 (priced as % of 100% par, in 32nds), has 8 years left to maturity, carries a 7% coupon (paid semiannually), coupons can be reinvested at 4%, and your interest rate model expects an 80% probability of interest rates rising 200 basis points and a 20% probability of interest rates falling 100 basis points over a 3-year holding period.