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Consider a 3-year bond with a 5% YTM and a $100 face value, which delivers a 5% coupon. Coupon frequency and compounding frequency are assumed
Consider a 3-year bond with a 5% YTM and a $100 face value, which delivers a 5% coupon. Coupon frequency and compounding frequency are assumed to be annual. Its duration is equal to 2.86. Show that your total rate of return for 2.86 years of investment horizon is the same as current YTM for small increases and decreases in the interest rates
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