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#'s 2,3 and 4 2. Suppose you purchase a 10-year, 4% semi-annual coupon bond for 78.681. If the yield remains constant and you reinvest the
#'s 2,3 and 4
2. Suppose you purchase a 10-year, 4% semi-annual coupon bond for 78.681. If the yield remains constant and you reinvest the coupons you receive at that yield, what will be the value of those coupons when the bond matures in 10 years? 3. Suppose you purchase a 10-year, 4% semi-annual coupon bond for 78.681. You plan to hold the bond until it matures and reinvest all coupons at the prevailing yield for bonds of this risk level. Immediately after you purchase the bond, the yield for equivalently risk bonds decreases by 100 basis points. What will be your return on this investment in this scenario? Round your answer to three decimal places. 4. Same scenario as in Question 3 above. Suppose you purchase a 10-year, 4% semi-annual coupon bond for 78.681. Immediately after you purchase the bond, the yield for equivalently risk bonds decreases by 100 basis points. However, instead of holding the bond until maturity, you plan to hold the bond for 2 years and then sell it. All coupons will be reinvested at the prevailing yield on equivalently risky bonds. What will be your return on this investment in this scenario? Round your answer to three decimal places. 5. What does duration measure? a. Sensitivity of a bond's price to changes in its time to maturity. b. Sensitivity of a bond's price to changes in interest rates. c. Sensitivity of a bond's price to changes in coupon payments. d. Sensitivity of a bond's price to changes in par valueStep by Step Solution
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