Question: The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all , all divided by the beginning bond price.
1. What is the holding period return on a bond with a par value of $1,000 and a coupon rate of 6 percent of its price at the beginning of the year was $1,050 and its price at the end was $940? Assume interest is paid annually.
2. Can you give two reasons the price of the bond might have fallen over the year?