However, at the start of year 5 (or end of year 4), suppose the yield curve dropped
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However, at the start of year 5 (or end of year 4), suppose the yield curve dropped to 8% and AIF called the bond. Assume you reinvest your investment funds in a new six-year bond at par and the yield curve remains flat at 8%. What is your total return for the call period? What is your total return for the 10-year period? How do the total returns compare to the YTM when you purchased the bond?
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