Consider a $10k government bond due after 10 years. The bond calls for a payment of $500/year at the end of each of the next 10 years and a $10k payment at the end of the 10 years.

a) What interest rate does the bond pay?

b) 5 years go by and the bond is still trading at $10k. But there has been 5 x $500 = $2,500 in interest payments made. What is the interest rate now?

c) At the end of year 6 some and just after the 6^th interest payment has been made, the bond trades down from $10k to $9,180. What is the new interest rate on the bond?