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Suppose you buy a bond with a coupon of 9.8 percent today for $1,100. The bond has 7 years to maturity. Assume interest payments are

Suppose you buy a bond with a coupon of 9.8 percent today for $1,100. The bond has 7 years to maturity. Assume interest payments are reinvested at the original YTM.

a. What rate of return do you expect to earn on your investment?

b. Two years from now, the YTM on your bond has increased by 2 percent, and you decide to sell. What price will your bond sell for?

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