The second investor buys the 10-year, 8% annual payment bond at 85.503075 and sells it in four
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The second investor buys the 10-year, 8% annual payment bond at 85.503075 and sells it in four years. After the bond is purchased, interest rates go up to 11.40%. The future value of the reinvested coupons at 11.40% after four years is 37.899724 per 100 of par value.
Transcribed Image Text:
[8x (1.1140)³] + [8× (1.1140)²] + [8 × (1.1140)¹] + 8 = 37.899724
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