A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8% semiannual coupon, and the bond has a 9% nominal yield to maturity.

a.) Draw a timeline showing the expected cash flows to the bondholder. Make sure you clearly identify the period and the associated cash flow.

b.) What is the current price for this bond?

c.) Assume two years have passed and the nominal yield to maturity for this bond is/will be 6%. What is/will be the new price for the bond?

d.) What is the percentage change in the price of each bond assuming you bought it at the price found in part b and sold it at the price in part c?

e.) What is the total return earned by an investor who bought the bond at the price found in part b and sold it at the price in part c? [Hint it is not the same as part d]