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You are planning to buy a corporate bond with a seven-year maturity that pays 7 percent coupon interest. The bond is priced at $108,500 per
You are planning to buy a corporate bond with a seven-year maturity that pays 7 percent coupon interest. The bond is priced at $108,500 per $100.000 par value. You expect to sell the bond in two years when a similar-risk five year bond is priced to yield 7.2 percent annually to maturity. Assuming that you can reinvest all cash flows at an 8 percent annual rate (4 percent semiannually), calculate your expected total return over the two-year holding period.
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Calculation of expected total return over the twoyear holding period By extracting the following inf...
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