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1. Suppose that you have just purchased a ten-year zero-coupon bond with par value of $1,000. The market interest rate for this bond is 2%.

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1. Suppose that you have just purchased a ten-year zero-coupon bond with par value of $1,000. The market interest rate for this bond is 2%. During the day, the interest rate drops to 1%. (a) What is your capital gain if you sell the bond at the end of the day? (b) How will you answer change if you instead consider a one-year zero-coupon bond? Suppose that yield curve is flat. Comment on the differences

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