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Suppose you purchase a 30 -year Government of Canada bond with a 5% annual coupon, initially trading at par. In 10 years' time, the bond's
Suppose you purchase a 30 -year Government of Canada bond with a 5% annual coupon, initially trading at par. In 10 years' time, the bond's yield to maturity has changed to 7% (EAR). (Assume $100 face value bond.) a. If you sell the bond now, what internal rate of return will you have earned on your investment in the bond? b. If instead you hold the bond to maturity, what internal rate of return will you earn on your investment in the bond? c. Is comparing the IRRs in (a) versus (b) a useful way to evaluate the decision to sell the bond? Explain
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