Suppose you purchase 5-year annual coupon bond in the primary market. The face value of the bond is $10,000. The current risk-adjusted interest rate is 2%. The bond belongs to an asset class appropriated a 3% risk premium.

a) After a year has passed, you collect your coupon payment. At that point, a new investment becomes available to you and you decide to sell your bond in the secondary market. By the time of the sale, the economic outlook has improved and the risk-free rate has risen to 1%. The risk-premium has remained unchanged. What was your one-year rate of return for the one-year period you held the bond?