Question: I. Current yield is 6.2% today on a bond that is just issued with 4 years to maturity, 6.5% coupon rate and $1,000 face value

I. Current yield is 6.2% today on a bond that is

I. Current yield is 6.2% today on a bond that is just issued with 4 years to maturity, 6.5% coupon rate and $1,000 face value a) (10 points) What will be the price of this bond exactly in two years (after it distributes its second coupon) if the market rate doubles? c) (15 points) How much capital gains should an investor expect to get in the subsequent year if she buys this bond at that time (in two years, after the second coupon is distributed and when the market rate is twice as much as today's market rate)? The price of the bond in the subsequent year (one year after the bond is purchased at time-2) will be

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