Jason has just bought a bond that pays 2% annual coupons with $1,000 face value and 30 years to maturity.

(a) If the yield of the bond bought today was 3%, what was its purchase price? (4 marks)

(b) One year later, the bond's YTM has dropped to 2.5%. If you sell the bond immediately after receiving the coupon, i) what is the bonds current yield? (2 marks) ii) what is the bonds capital gains yield (CGY)? (4 marks) iii) what is the bonds total (holding period/1-year total) yield? (1 mark)

(c) Now suppose another year has passed and the bonds YTM remains unchanged at the previous years (Year one) level. If you sell the bond immediately after receiving the second years coupon, calculate i) the 2-year CGY (4 marks) ii) the total interest incomes (coupon and reinvestment of coupons) for the two years (3 marks) iii) the 2-year holding period/total yield.