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A government bond matures in 4 years, makes annual coupon payments of 4.0%, and offers a yield of 2.0% compounded per year. Required: a. Suppose

A government bond matures in 4 years, makes annual coupon payments of 4.0%, and offers a yield of 2.0% compounded per year.

Required:

a. Suppose that one year later the bond still yields 2.0%. What return has the bondholder earned over the 12-month period? 

(Do not round intermediate calculations . Enter your answer as a percentage rounded to 2 decimal places.)

Rate of return? %

b. Now suppose the bond yields 1.0% at the end of the year. What return did the bondholder earn in this case?

(Do not round intermediate calculations . Enter your answer as a percentage rounded to 2 decimal places.)

Rate of return ? %

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