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A 10-year maturity mortgage-backed bond is issued. The bond is a zero-coupon bond that promises to pay $10,000 (par) after 10 years. At initial issue,
A 10-year maturity mortgage-backed bond is issued. The bond is a zero-coupon bond that promises to pay $10,000 (par) after 10 years. At initial issue, bond market investors require a 3 percent interest rate return on the bond. After holding the bond for five years you decide to sell and bond market investors require a 5 percent interest rate return. What is your annual yield for the five years you held the bond?
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