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You are strongly of the opinion that interest rates are going to fall within the next six months. Consequently, you are considering investing in an

You are strongly of the opinion that interest rates are going to fall within the next six months. Consequently, you are considering investing in an eight-year treasury bond that is currently trading at a yield to maturity of 2.20%. The bond has a coupon rate of 2.20% and pays coupon interest semi-annually. Your belief is that the yield to maturity on these bonds will fall by 40 basis points to 1.80% within the next six months. 


What percentage return will you earn if you buy the bonds now and sell them in six months, if your belief is realised?

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