Sara decides to buy a 6 percent, 10-year straight coupon bond for $100, which pays annual coupons of $6 at the end of each year. At the end of the first year, the bond is trading at $115. At the end of the second year, the bond trades at $100.
a. What is Sara's return over the first year?
b. What is Sara's return over the second year?
c. What is the average return per year for the two year period? Use the arithmetic average.