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Suppose you take out a loan for 5% annual effective interest to be repaid (interest and principal) in one lump sum after 10 yrs. the
Suppose you take out a loan for 5% annual effective interest to be repaid (interest and principal) in one lump sum after 10 yrs. the proceeds of the loan are used the purchase a 10-yr, 10000, 8%, par-value bond with semiannual coupons and a 6% yield rate convertible semiannually. As coupon payments are received, you immediately reinvest them into a savings account earning 4% convertible semiannually. Immediately after the loan is repaid, what is her net gain from this investment? Please show work with formulas
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