Consider the following bond with a face value of $1,000, currently being sold in the primary market: a 30 year zero-coupon bond, price at $231.38. (Note: zero-coupon bond is a bond without coupon payments, only a face value received at maturity).

a. Calculate the yield to maturity of the bond.

b. Suppose that next year, interest rate remains the same. Calculate the new price of the bond. If you sell it at the new price, calculate the rate of return you get.

c. Suppose alternatively that after one year, interest rates increase by 5 percentage points. Redo the calculations in (b) for the bond.