The buy-and-hold investor purchases the 10-year, 8% annual payment bond at 85.503075. After the bond is purchased
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The buy-and-hold investor purchases the 10-year, 8% annual payment bond at 85.503075. After the bond is purchased and before the first coupon is received, interest rates go up to 11.40%. The future value of the reinvested coupons at 11.40% for 10 years is 136.380195 per 100 of par value.
Transcribed Image Text:
[8 x (1.1140)] + [8×(1.1140)8] + [8 × (1.1140)7] + [8x (1.1140)%] + [8x (1.1140)5] + [8 × (1.1140)4] + [8× (1.1140)³] + [8 × (1.1140)²] + [8x (1.1140)¹] + 8 = 136.380195
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