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1. Hafu buys a 10-year bond with annual coupons. The par value of this bond is 10000 as is the redemption value, and it has

1. Hafu buys a 10-year bond with annual coupons. The par value of this bond is 10000 as is the redemption value, and it has an annual coupon rate of 6%. The price Hafu pays for the bond gives it an annual effective yield of 12%.


2. Hafu has set up her investments so that the coupons are immediately deposited in a savings account with an annual effective rate of 9%. What is the annual effective yield (IRR) of Hafu’s overall investment over the 10-year term?

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