Question

Michael Jordan purchased a 3-year bond with the face value of 20,000 in the primary market....

Michael Jordan purchased a 3-year bond with the face
value of 20,000 in the primary market. The current risk-free interest rate was
0.25%, and a risk premium on that bond is 3%. A year later after collecting his
yearly coupon payment, Mr. Jordan decided to sell that bond in the secondary market.
By that time, the economic situation has improved, and the risk-free interest rate
has risen to 1%. What is Mr. Jordan's rate of return for the one-year period he held
the bond? Please note, to get full points, you need to show all your steps.

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