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Suppose that an investor with a three year investment horizon is considering purchasing a seven year 7 % coupon bond selling at par. The investor

Suppose that an investor with a three year investment horizon is considering purchasing a seven year 7% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of 8% and that at the end of the investment horizon one year bonds will be selling to offer a yield to maturity of 10%. What are the total return and IOI in this investment? 3.\(20\%)\) Suppose that an investor with a three-year investment horizon is considering purchasing a seven-year \(7\%\) coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an anmual interest rate of \(8\%\) and that at the end of the investment horizon one-year bonds will be selling to offer a yield to maturity of \(10\%\). What are the total return and IOI (interest on interest) on this investment?

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