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Assume that you pay $872.83 for a long term bond that carries a coupon of 8.5%. Over he course of the next 12 months, interest
Assume that you pay $872.83 for a long term bond that carries a coupon of 8.5%. Over he course of the next 12 months, interest rates drop sharply. As a result you sell the bond at a price of $995.12 a. Find the current yield that existed on this bond at the beginning of the year. What was it by the end of the one-year holding period? b. Determine the holding period return on this investment. (Hint: See Chapter 5 for the HPR formula.) a. The current yield that existed on this bond at the beginning of the year is % Round to two decimal places
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