Bond A is a $1,000, 6% quarterly coupon bond with 5 years to maturity.

(a) If you bought Bond A today at a yield (APR) of 8%, what is your purchase price? Is this a premium or discount bond? Why? (4 marks)

(b) One year later, Bond A's YTM (APR) has gone down to 6% and you sell it immediately after receiving the coupon.

(i) What is the current yield? (2 marks)

(ii) What is the capital gains yield? (5 marks)

(iii) What is the one-year total rate of return (in APR) if the coupons are reinvested at 2% per quarter during the holding period? (5 marks)

(iv) Can Bond As one-year total rate of return be determined correctly by simply adding up the current yield and the capital gains yield? Explain your answer without calculations. (3 marks)