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Suppose you purchase a 10-year bond with 6.7% 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 6.7% 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 4.8% when you purchased and sold the bor a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) O A. Year 0 A 01 Cash Flows $114.81 $6.70 $6.70 $6.70 $116.41 OB. Year N + + Cash Flows $109.71 $6.70 $6.70 $6.70 $116.41 OC. Year Cash Flows - $116.41 $6.70 $6.70 $109.71 OD. Year N Cash Flows - $114.81 $6.70 $6.70 $6.70 $116.41 b. What is the annual rate of return of your investment? The annual rate of return of your investment is 4.80%. (Round to one decimal place.)
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