Assume you are purchasing a new bond today which has a three-year maturity, a principal of $10,000, and a coupon rate of 6%. The current interest rate is 3%. How much do you pay for the bond today? $ (Write your answer to two decimal places) How much is the annual coupon payment? $ (Write your answer in whole dollars) After one year you decide you want to sell your bond. The interest rate is then 8%. How much can you sell your bond for? $ (Write your answer to two decimal places) What is your annual rate of return over your year of investment? % (Write your answer to two decimal places) Suppose you instead decide to sell your bond after two years, at which point the interest rate is 10%. How much do you sell your bond for at that point in time? $ (Write your answer to two decimal places) What is your average annual rate of return over your two year investment period? % (Write your answer to two decimal places) Suppose you instead decide to wait and hold your bond for the three full years until maturity. What is your average annual rate of return over your three year investment period? % (Write your answer to two decimal places)

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.