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Suppose an investor has a 6-year investment horizon and is considering a 13-year, 9%S.A. coupon bond, currently selling at its PAR value ($1,000). The investor
Suppose an investor has a 6-year investment horizon and is considering a 13-year, 9%S.A. coupon bond, currently selling at its PAR value ($1,000). The investor expects to be able to reinvest the first 4 semi-annual coupons at 8% (over their entire reinvestment interval), but expects to be able to reinvest the last 8 coupons at 10%. The required YTM on 7-year bonds of similar risk at the end of the investment horizon is expected to be 10.6%.What is the total [expected] return offered by this security?
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