10. The example illustrates the concept about price risk and reinvestment risk. Assume you purchase a four-year annual coupon bond that pays $100 each year, has a yield to maturity of 10% and has a face value of $1,000. Suppose the yield for the same bond jumps to 12% one day after your purchase, and remains at 12% till maturity. What will be your return if you hold your bond for only one day? What will be your annualized rate of return if you hold it till maturity?

A) a gain of 6.1% for one day; an annualized rate of return of 8.5% for four years

B) a loss of 6.34% for one day; an annualized rate of return of -6.46% for four years

C) a gain of 6.24% for one day; an annualized rate of return of 8.36% for four years

D) a loss of 6.1% for one day; an annualized rate of return of 8.5% for four years

E) a loss of 6.1% for one day; an annualized rate ofreturn of 10.26% for four years