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Two years ago, Mathew purchased a 10 year government bond with a yield of 4.75%. Today, the interest rate on government bonds with 8 years

Two years ago, Mathew purchased a 10 year government bond with a yield of 4.75%. Today, the interest rate on government bonds with 8 years to maturity is 3.5%. If Mathew sells his bond today, he most likely will

1) realize a capital gain.

2) realize a capital loss.

3) sell the bond at face value.

4) sell the bond at par value.

Explain your answer.

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