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ON d.170 5. (15 pts) An ihvestor has two bonds in their portfolio, Bond A and Bond B. Each of the Y esto?849x bonds matures
ON d.170 5. (15 pts) An ihvestor has two bonds in their portfolio, Bond A and Bond B. Each of the Y esto?849x bonds matures in 2 years, and has a par value of $1,000. Bond A pays an 5% anmal coupon and has a yield to maturity of 2.85%, while Bond B pays a 2.5% annual coupon with a vield to maturity of 4.85%. Assuming that the yield to maturity for each bond remains constant, calculate the price of the bonds for each of the following years lo Inaturity. Bond B Year's Until Bond A Maturity 2 1000 FV=1000 Pya No 1000 N=a 1 1049.70% 75 1624.50INF.0455 1048.99 0 PMT=25 X 1099.38 -4 What rate of return would you earn on bond A if you bought it with two years until maturity and held it for 1 year? X - 4 3
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