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4. Suppose that an investor with a five-year investment horizon is considering purchasing a
sevenyear 10% coupon bond selling at par. The investor expects that he can reinvest the coupon
payments at an annual interest rate of 9.4% and that at the end of the investment horizon two-
year bonds will be selling to offer a yield to maturity of 11.2%. What is the five-year total return
for this bond?

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4. Suppose that an investor with a five-year investment horizon is co.pdf

  • 1. 4. Suppose that an investor with a five-year investment horizon is considering purchasing a sevenyear 10% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of 9.4% and that at the end of the investment horizon two- year bonds will be selling to offer a yield to maturity of 11.2%. What is the five-year total return for this bond?