Three investors invest in the same 10-year 8% annual coupon bond. They bought the bond at the same price ($85.503075 for a par value of $100) and at the same time. A is a buy-and-hold investor (hold till maturity), B will sell the bond after four years, and C will sell the bond after seven years.

Q)

. After the bond is purchased by the three investors and before the first coupon is received, interest rate go up to 11.4%. Calculate:

i. What is the change in IOI for each investor?

ii. What is the capital gain/loss for each investor?

iii. What is the difference between change in IOI and capital gain/loss for each investor?