At t=0 you buy a bond that has 3 years to maturity and pays annual coupons at a coupon rate of 5% on a par value of $1,000.

At t=0 the bond trades at a yield‐to‐maturity of 10%.

In one year (t=1), you receive the first coupon payment and immediately sell the bond.

At t=1, the bond (with 2 years remaining) still trades at a yield‐to‐maturity of 10%.

What is the per cent capital gain and the per cent net gain from the sale of the bond over the one year period (from t=0 to t=1)?

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    Please do not copy-and-paste your homework question. Instead, tell us what your thoughts are and tell us what you don’t understand. Show an attempt to solve the problem. We are happy to help, but we will not do your homework for you. – Ben Miller Jul 19 at 9:36
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    Also, please choose a title that more specifically describes the question. Pretty much every question on this site is a "finance question" that someone wants an answer to. – glibdud Jul 19 at 10:37

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