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Suppose you purchased a $1000 face value coupon bond with 22years to maturity for $1,000. It pays a coupon of $88per year.Assume that the current

Suppose you purchased a $1000 face value coupon bond with 22years to maturity for $1,000. It pays a coupon of $88per year.Assume that the current yield to maturityis8.8%.

(a) Calculate the current yield.

(b) Suppose after one yearafter purchasing the bond you decide to sell it. Supposethat the yield to maturity hasrisen to 10%. What is the rate of return that you earned for holding the bond for one year [Hint: Youll need to solve for the price of the bond next year when you sell it]

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