David Palmer purchased Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (in another investment account).
Calculate:
i) the current yield,
ii) the 2-year capital gains yield and
iii) the 2-year total rate of return on investment for David. [Note that this question is NOT asking for average yearly (total) return. Hint: think of total accumulation as FV (Annuity)of coupons and selling price
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