An investor purchases the following debt instruments with a $1,000 face value, for $826.44 and $1,000 respectively.

i) a pure discount two-year bond, and

ii) a two-year 10% annual coupon bond

Calculate the return after two years if immediately after purchase interest rates

a) fall by 1% p.a.

b) remain constant, a

nd c) increase by 1`% p.a. on all maturities.

(Assume that the yield curve is flat).