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A government bond matures in 7 years, makes annual coupon payments of 5.1% and offers a...

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Finance

A government bond matures in 7 years, makes annual couponpayments of 5.1% and offers a yield of 3.1% annually compounded.Assume face value is $1,000. (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces.)

a. Suppose that one year later the bond still yields 3.1%. Whatreturn has the bondholder earned over the 12-month period?

b. Now suppose that the bond yields 2.1% at the end of the year.What return did the bondholder earn in this case?

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