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10. Suppose that you pay $11,000 for a newly issued 5 year coupon bond. The bond has a face value of $10,000 and a
10. Suppose that you pay $11,000 for a newly issued 5 year coupon bond. The bond has a face value of $10,000 and a coupon rate of 5%. a. If you held the bond until it matured, would your yield be more than, equal to, or less than 5%? Explain. b. Suppose that, after holding the bond for two years and collecting the first two coupon payments, you sell it in the secondary market. If the interest rate at that time is 8% per year, how much will you be able to sell it for? c. What was your rate of capital gain over the two years that you held the bond? d. What was your holding period rate of return over the two years that you held the bond?
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