Assume that you pay $946.09 for a long-term bond that carries a coupon of 7.4%. Over the course of the next 12 months, interest rates drop sharply. As a result, you sell the bond at a price of $1,040.72.

a. Find the current yield that existed on this bond at the beginning of the year. What was it by the end of the one-year holding period?

b. Determine the holding period return on this investment.