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You bought a 10% coupon rate bond for $1000. Assume that the current yield on the bond is 10% and the interest rate is 10%.

You bought a 10% coupon rate bond for $1000. Assume that the current yield on the bond is 10% and the interest rate is 10%. The bond matures in 3 years. You intend to sell the bond after holding it for a year. However the interest rate after the first year increases to 15% and stays at 15% for years 2 and 3.


A.) What is the price of the bond after the first year? 



B.) What is the rate of return on your investment?

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