Suppose you have a horizon at the end of six years and buy an eight-year, 8.5% coupon

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Suppose you have a horizon at the end of six years and buy an eight-year, 8.5%

coupon bond with face value of $1,000 and annual coupon payments when the applicable yield curve is flat at 10%. What would your total return be given the following cases:

a. Immediately after you buy the bond the yield curve drops to 8% and remains there until you sell the bond at your horizon date.

b. Immediately after you buy the bond the yield curve increases to 12% and remains there until you sell the bond at your horizon date.

c. Is there any market risk? If not, why?

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Bond Evaluation Selection And Management

ISBN: 103132

2nd Edition

Authors: R. Stafford Johnson

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Question Posted: Sep 20, 2024 01:02 AM

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Suppose you have a horizon at the end of six years and buy an eight-year, 8.5% coupon

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Bond Evaluation Selection And Management

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