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n 15 March 2002, you purchased a 2-year Treasury bond with face value of $10,000 and a 4% coupon (payable semiannually). The price of the

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n 15 March 2002, you purchased a 2-year Treasury bond with face value of $10,000 and a 4% coupon (payable semiannually). The price of the bond was $9,750. The bond promises a coupon 200 on 15 September 2002, 15 March 2003, 15 September 2003, and 15 March 2004 (on this last date the bond will repay its face value). a. Based on the following, compute the annualized IRR of the bond purchase. Date 15-Mar-02 15-Sep-02 15-Mar-03 15-Sep-03 15-Mar-04 Cash flow 9,750 200 200 200 2 4 10,200 7 8 Semiannual IRR K--2 b. Immediately after receiving the $200 bond interest payment on 15 September 2002, you sold the bond for $10,000. What was your ex post annualized yield? What was the ex ante annual- ized yield of the buyer of the bond

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