Question: Suppose in 2 0 2 1 you buy two - year $ 1 0 0 0 face - value 5 % coupon bond for $

Suppose in 2021 you buy two-year $1000 face-value 5% coupon bond for $950. In 2022, interest rates decrease to 3%. If you decide to sell your bond in 2022, what will be the selling price and one-year rate of return for you?
$1,007;11.2%
$1,019.4;12.6%
$1,007;10.7%
$1,019.4;11.9%
 Suppose in 2021 you buy two-year $1000 face-value 5% coupon bond

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