You purchase a bond with a Par value of $1,000, a coupon rate of 4% (paid annually), and a maturity of 4 years for $1,037.17. Immediately after receiving your second coupon, interest rates rise to 6%. You become nervous about further rate increases and consider selling the bond. Determine the price at which you can sell the bond if you sell it exactly halfway between years 2 and 3. Answer in whole number form to two decimal places (e.g., 12.65 not 13).
Under these conditions, how much larger will your first year of annual retirement expenditures be in nominal terms compared to real terms? Answer in whole number form (e.g., 3,000).