What return has the bondholder earned


Problem:

A 6 year government bond makes annual coupon payments of 5 percent and offers a yield of 3 percent annually compounded. Suppose that one year later the bond still yields 3 percent.

What return has the bondholder earned over the 12-month period?

Now suppose instead that the bond yield is 2 percent at the end of the year. What return would the bondholder earn in this case?

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Finance Basics: What return has the bondholder earned
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