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Today, you purchased a 4% coupon bond with 20 years to maturity. The bond makes semi-annual coupon payments. (a) If the yield to maturity on

Today, you purchased a 4% coupon bond with 20 years to maturity. The bond makes semi-annual coupon payments.

(a) If the yield to maturity on this bond is 6%, what is the bond price today? (4 marks)

(b) Five years from today, you expect to sell the bond. If the yield to maturity increases by 1.64% during this five-year holding period, what will be the holding period yield (HPY) on your investment? (8 marks)

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