A government bond matures in 6 years, makes annual coupon payments of 5.5% and offers a yield of 3.5% annually compounded. Assume face value is $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a. Suppose that one year later the bond still yields 3.5%. What return has the bondholder earned over the 12-month period?

Rate of Return %=

b. Now suppose that the bond yields 2.5% at the end of the year. What return did the bondholder earn in this case?

Rate of Return %+