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A newly issued U . S . Federal T - Note matures in exactly five years. The coupon rate is 3 . 1 2 5

A newly issued U.S. Federal T-Note matures in exactly five years. The coupon rate is 3.125% and coupons are paid semi-annually. The bond is priced at $102.07(FV = $100) and yields 2.68%. The economy is slowing and many forecasters predict a recession. You expect that the monetary authorities will relax monetary policy which will cause interest rates to fall. You expect the yield on the 5-year bond to fall to 1.6463%. You want to earn $1M by investing in bonds to profit from the interest rate change, how many bonds do you buy? When calculating profit, round the new price of the bond to two decimal places.

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