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You purchase a 3-yr bond, face value 1,000 and annual 4% coupon. You have a two-year horizon. Use the information from Questions #1 and #2

You purchase a 3-yr bond, face value 1,000 and annual 4% coupon. You have a two-year horizon. Use the information from Questions #1 and #2 to get expected future rates, which you will use for the reinvestment rate and the rate to discount the bond when you sell it. Calculate expected ROR. Your result should equal todays 2-yr spot rate.

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