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10 In 2021, you buy a 10% coupon $1,000-face-value bond at a 12% interest rate. Coupon is paid annually. In 2022, the interest rate on

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10 In 2021, you buy a 10% coupon $1,000-face-value bond at a 12% interest rate. Coupon is paid annually. In 2022, the interest rate on newly issued comparable bonds in the market falls from 12% to 6%. Fill out the following table for the one-year return (from 2021 to 2022) on your coupon bond assuming different maturities. Hint: You may want to refer to a supplemental handout, HW#2-Q10.pdf, to understand the calculation Years to Bond Maturity Purchase when Bond Price (in is Purchased 2021) (in 2021) Current Yield Bond Price (in 2021,%) Next Year (in 2022) P. Rate of Capital Gain (%) Pt+1-P Po Rate of Return (%) = Current Yield + Rate of Capital Gain 1 2 3 4 5

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