Let’s say that a new-issue treasury bond was selling on July 20th 2016 for $1,000. It had a 1,000 face value and a $50 coupon payment.
On July 21st 2016, you purchased the bond for $990 and then held it for one year, collecting its first coupon payment and then selling it immediately afterwards. If the Yield Curve did not change at all after July 21st 2016, then what actual annual return or yield did you earn on this bond over your 1-year holding period? (Hint: No calculations are necessary to answer this question.)
a. A return of 5%.
b. A return of more than 5%.
c. A return of less than 5%.
d. The return could have been higher than, equal to, or lower than 5%.