We are considering two bonds. One pays 3% and has a maturity of 8 years, while the
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Question:
We are considering two bonds. One pays 3% and has a maturity of 8 years, while the other pays 4% and has a maturity of 8 years. If we expect rates to fall by 1% from their current level, which is 4%, where should we invest, and what is the total ROR we make for the one versus the other? (Note the first bond drops only .5%, while the second required rate drops by 1%)
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