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1. A $1000 bond has a 5% coupon and matures after 8 years. The bond is currently selling for 881$. What is the current yield?

1. A $1000 bond has a 5% coupon and matures after 8 years. The bond is currently selling for 881$. What is the current yield?

2. Given the information in problem 1, if you bought the bond at issue for $1,000, and interest rates increased after the purchase, and assuming you hold the bond to maturity, what would be your annual rate of return?

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