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April 23, 2014

Homework Help: bond

Posted by ali on Monday, July 30, 2012 at 3:27pm.

Assume an investor with 5 years investment horizon is considering purchasing a 7 years 6% coupon selling at par. The investor expects to reinvest the coupon at 5% and that the bond will be selling to offer a yield to maturity of 4% in five years. What is the expect total return for this bond? Express your answer on a bond-equilent basis and on an effective annual rate basis.

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