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Suppose you buy a 30-year, 7.5% (annual payment) coupon bond for $980 (when its yield to maturity is 7.67%) and you plan to hold it
Suppose you buy a 30-year, 7.5% (annual payment) coupon bond for $980 (when its yield to maturity is 7.67%) and you plan to hold it for 20 years. Assume the YTM and the reinvestment rate on the coupons are same and par value of $1,000. Also, assume that the YTM and the reinvestment rate on the coupons go up to 8% after the bond is purchased and before the first coupon is received. What will be the realized compound return?
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