Q1) Consider a coupon bond with an annual coupon payment C = $100, a face value F = $3, 000, and a maturity date January 1, 2012. Suppose you BUY this bond on January 1, 2007 for $2500 and you SELL it on January 1, 2008 for $3000. Which of the following statements are TRUE for this bond:

a. Your (annual) current yield is 0.04 (1/25).

b. Your return rate is your current yield plus the rate of your capital gain or loss.

c. Your return rate is MORE than your current yield.

d. All of the above are true.

e. Only A and B are true

Q2) If a coupon bond with an $8000 face value and a 5 year maturity has a $400 coupon payment and a purchase price of $10,000, then the CURRENT YIELD is

a. 4 percent

b. 5 percent

c. 8 percent

d. 10 percent

(PLEASE EXPLAIN)