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A bond with exactly ten years remaining until maturity offers a 7% coupon rate with interest paid annually, at a market discount rate of 8%.
A bond with exactly ten years remaining until maturity offers a 7% coupon rate with interest paid annually, at a market discount rate of 8%. Par value is 100. a) Immediately after you buy the bond, yield drops to 6%. If you hold the bond for 2 years, what would be the future value of reinvested coupons? What would be your rate of return? b) If you hold the bond for 9 years, what would be the future value of reinvested coupons? What would be your rate of return?
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