Suppose that an investor with a five-year investment horizon is considering pur- chasing a seven-year 9% coupon
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Suppose that an investor with a five-year investment horizon is considering pur- chasing a seven-year 9% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of 9.4% and that at the end of the investment horizon two-year bonds will be selling to offer a yield to maturity of 11.2%. What is the total return for this bond?
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