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You buy a 15-year, 8% coupon bond (pay annually), YTM is 9.89%. The Macaulay duration of the bond is 8.77. You hold the bond for

You buy a 15-year, 8% coupon bond (pay annually), YTM is 9.89%. The Macaulay duration of the bond is 8.77. You hold the bond for 7 years and realized a return that is smaller than 9.89%. What could have happened to the interest rate?

Cannot be determined.

Decreased.

Increased.

Stayed the same.

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