The UK government issues a 5-year bond which makes annual coupon payments of 5 per cent and

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 The UK government issues a 5-year bond which makes annual coupon payments of 5 per cent and offers a yield of 3 per cent annually compounded. Suppose that one year later the bond still yields 3 per cent. What return has the bondholder earned over the 12-month period? Now suppose that the bond yields 2 per cent at the end of the year. What return would the bondholder earn in this case?

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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