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Captain Agooji bought the 4-year Treasury note at the par value of GHS100. The coupon rate on the note was 18% and coupon payments
Captain Agooji bought the 4-year Treasury note at the par value of GHS100. The coupon rate on the note was 18% and coupon payments were made annually. When Agooji received the first interest, he could invest it for 18.5% interest; when the second interest was received, he could invest it for 17% interest; and when the third interest was received, he could invest t for 19% interest. When the fourth and final interest was received average interest rate was 16%. Required: (a) Explain the difference between yield to maturity and realised compound return. Focus on at least two points of distinction. [4 marks) (b) Assuming that Captain Agooji reinvested coupon payments at the respective interest rates over the holding period, compute the realised compound rate of return on his investment in the note.
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