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If you believed rates were going to rise, which bond would you choose? What is the trade-off you are making if rates do not rise?

If you believed rates were going to rise, which bond would you choose?

What is the trade-off you are making if rates do not rise?

Bond Maturity Coupon Rate Yield Price Price @ yield +.25%
Treasury 2 1.250% 1.350% 998.03 993.14
Treasury 5 1.625% 1.750% 994.04 982.24
Treasury 10 2.250% 2.150% 1,008.96 986.73
Treasury 30 2.750% 2.800% 989.90 941.31

Suppose that question above you bought the 5 year UST note at the price you computed.

If one year later market yields were 1.625%, what is your holding period return on the note?

Is it higher or lower than the yield at the time of purchase? Why?

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