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Suppose you purchase a 10-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth
Suppose you purchase a 10-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.12% when you purchased and sold the bond,
a. What cash flows will you pay and receive from your investment in the bond per face value?
b. What is the internal rate of return of your investment? Note: Assume annual compounding.
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