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2. * A bond with a redemption value of 100 pays coupons of 1.50 semi-annually (i.e. the bond holder receives 1.50 twice per year), with

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2. * A bond with a redemption value of 100 pays coupons of 1.50 semi-annually (i.e. the bond holder receives 1.50 twice per year), with the first coupon due in half a year. The bond will mature in ten years' time. It is currently selling for 95.25. (a) Without making any calculations can you determine what is greater between the redemption yield and the interest yield? Why? (b) Compute the redemption yield (annual effective)

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