Fixed income returns? into, therefore, decrease, currently

pacmandefense

A couple basic FI questions that I’m having a mental lapse with:
1.)   If say you currently hold a bond and rates decrease and thus the mkt price of your bond increases, and you choose to sell at a premium - how does that factor into your return?  Does that mean you earn a return potentially greater than the actual coupon rate?
2.)   Similarly, if you currently hold a bond and rates (inflation) is expected to increase and therefore diminish prices, how will that effect your return and how is the impact on your return measured?  
Thanks in advance.  My mind is getting cloudy with all this info.

Chuckrox8

You can earn a return greater than the coupon rate even if rates are unchanged. For instance, let’s say you buy a highly speculative issue with a really high discount rate. If the issuer does not default, you can realize a large return regardless of the coupon rate.
As for “expected” changes in rates - that depends on your definition of “expected”. If you take the yield curve to reflect market expectations, then it should be priced into the bond. If it’s based on your own expectations that differ from the market price, then the result depends on the situation.