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You pay $100 for a 10-year, 6-percent coupon bond with a face value of $100. You intended to hold the bond for three years. That
You pay $100 for a 10-year, 6-percent coupon bond with a face value of $100. You intended to hold the bond for three years. That is, you are going to buy a 10-year bond and then two years later, youll sell an 8-year bond. What is your two-year holding period return on the initial $100 investment if over the year you hold the bond, the interest rate falls from 6% to 5%? That is, the yield to maturity falls to 5%.
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