A government bond matures in 6 years, makes annual coupon payments of 4.25% and offers a yield of 4.25% annually compounded. Assume face value is $1,000.

Now suppose that two years later the bond yields 7.5%. What return has the bondholder earned over the 24-month period?

Multiple Choice

-2.0%

-1.6%Incorrect

-2.4%

-1.8%

-2.1%