The yield curve for AA-rated bonds is presently flat at a promised YTM of 9%. You buy a 10-year, 8% coupon bond with face value of $1,000 and annual coupon payments. Suppose your horizon is at the end of four years. What would your total return be given the following cases:

a. Immediately after you buy the bond the yield curve drops to 8% and remains there until you sell the bond at your horizon date.

b. Immediately after you buy the bond the yield curve increases to 10% and remains there until you sell the bond at your horizon date.

c. What type of risk is your investment subject to? How could the risk be minimized?