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You just bought a bond that matures in four years, has a 10% coupon rate paid annual, and a yield to maturity of 8%.After you
You just bought a bond that matures in four years, has a 10% coupon rate paid annual, and a yield to maturity of 8%.After you bought the bond, interest rates decrease to 6% and you hold the bond until maturity.What is your actual return on this bond?Show me how you could immunize this position and lock in an 8% return.(Hint: You need a numeric example to prove this to me.)
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