Consider a bond fund management firm that has made a 100 million investment in a 7-year zero-coupon government bond. This bond has a par value of 100. Calculate the 1-year investment return for this bond position, in both per cent change and monetary value terms, using the spot rates in Table 1. Assume the coupon payment frequency is annual. Explain your answer and comment on the shape and the shift in the spot rate curve.

Table 1 Euro area spot rates at start date and one-year later.

Maturity	Spot rates Start date	Spot rates One year later
1	1.25%	1.00%
2	1.50%	1.25%
3	1.75%	1.50%
4	2.00%	1.75%
5	2.25%	2.00%
6	2.50%	2.25%
7	2.75%	2.50%