Solve this problem by hand, do not use excel to solve.

You bought a 5% coupon, $1000 face value five year bond at par three years ago. What annual return did you expect to make when you made that investment? At the beginning of the second year, the bond's discount rate rose to 12%. You sold the bond today. What average annual return did you make on the bond over the three years that you held it?

Helpful hint:

Expected to earn 10%/year when you bought it (discount rate - expected return - 10% and Price = 1000)

Annual 3 year Return = [coupons + change in price] / price paid(1000)