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A 30-year maturity bond has a 7% coupon rate, paid annually. It sells today for $867.42. A 20-year bond has 6.5% coupon rate, also paid
A 30-year maturity bond has a 7% coupon rate, paid annually. It sells today for $867.42. A 20-year bond has 6.5% coupon rate, also paid annually. It sells today for $879.50. A bond market analyst at Wood Gundy in Toronto forecasts that in 5 years, 25-year maturity bonds will have yield to maturity of 8% and 15-year maturity bonds will have yield to maturity of 7.5%. You are able to invest coupons in the short-term securities market and get 6% return annually. Which bond offers the higher expected return over the five-year period?
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