Question: A four-year government bond makes annual coupon payments of 5% and offers a yield of 3% annually compounded. Suppose that one year later the bond

A four-year government bond makes annual coupon payments of 5% and offers a yield of 3% annually compounded.

Suppose that one year later the bond yields 4%, What return has the bondholder earned over the 12-month period?

Assume a face value of $1,000 and explain your calculation.

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