Question #$7$: Rate of Return $[10$ Points$]$

Suppose you purchased a $$1000$ face value coupon bond with $14$ years to maturity for $$914\mathrm{.}64$

today. It pays an annual coupon of $$61$ per year.

$($a$)$ Calculate the current yield. $[2$ Points$]$

$($b$)$ Suppose after one year after purchasing the bond you decide to sell it$.$ Suppose that the yield

to maturity is now $5\mathrm{.}8\%.$ What is the rate of return that you earned for holding the bond for one

year $[$Hint: You$$ll need to solve for the price of the bond next year when you sell it$.$ Also $1$ year

has passed since you purchased the bond.$][8$ Points$]$

Question #$8$: Consol $[3$ Points$]$

Calculate the yield$-$to$-$maturity of a consol selling for a price of $$920,$ a current yield of $3\mathrm{.}33\%$

and a face value of $$1000$