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Suppose that today you buy an 8 percent semi-annual coupon bond for $1060. The bond has 19 years to maturity. What rate of return (YTM)

Suppose that today you buy an 8 percent semi-annual coupon bond for $1060. The bond has 19 years to maturity. What rate of return (YTM) do you expect to earn on your investment?

Two years from now, the YTM on your bond will decrease by 1 percent, and you decide to sell. What price will your bond sell for? What amount of interest would be earned over the 2-year period? What would be the capital gain on the bond at the end of the 2-year period?

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