Suppose that a portfolio manager purchases $10 million of par value of an eight- year bond that
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Suppose that a portfolio manager purchases $10 million of par value of an eight- year bond that has a coupon rate of 7% and pays interest once per year. The first annual coupon payment will be made one year from now. How much will the portfolio manager have if she (1) holds the bond until it matures eight years from now, and (2) can reinvest all the annual interest payments at an annual interest rate of 6.2%?
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