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4) (3 pts) You buy a $1000 face value bond that mature in 3 years, pays a 4.2% annual coupon and is priced at $994.

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4) (3 pts) You buy a $1000 face value bond that mature in 3 years, pays a 4.2% annual coupon and is priced at $994. a. What is the Yield to maturity of this bond? YTM = 4.42 b. What is your realized compound yield if hold the bond to maturity and you reinvest the coupons at the following rates: Year 1 coupon is re-invested in a 2 year CD paying 3.2% per year Year 2 coupon is re-invested in a 1 year CD paying 2.9% per year % Realized compound Yield =

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