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Question 2. [6 points] a} A 10% coupon bond with 1000 price. What is the return of the bond for one year if the 'I'TM
Question 2. [6 points] a} A 10% coupon bond with 1000 price. What is the return of the bond for one year if the 'I'TM was initially 10% and decreased at the end of year to 5%? b} A 10% consol {perpetuity} with 1000 price. What is the return of the consol for one year if the 'I'TM was initially 10% and decreased at the end of year to 5%? c} Compare the return of the consol to the return of coupon bond and explain why there is a difference between the two returns. Hint: Calculate the initial price and endofperiod price first, then calculate the return
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