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A four-year government bond makes annual coupon payments of 4.5% and offers a yield of 2.5% annually compounded. a. Suppose that one year later the
A four-year government bond makes annual coupon payments of 4.5% and offers a yield of 2.5% annually compounded. a. Suppose that one year later the bond still yields 2.5%. What return has the bondholder earned over the 12-month period? And now suppose that the bond yields 1.5% at the end of the year. What return would the bondholder earn in this case?
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