1. You bought a bond two years ago for $1000 per bond. The bond is now selling for $950. It also paid $50 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond
2. For the bond in question 1, you expect to hold the bond for three more years, then sell it for $980. If the bond is expected to continue paying $50 per year over the next three years, what is the expected rate of return on the bond over the next three years?
3. Why is the expected rate of return in Question 2 less than the realized rate of return in Question 1?