A government bond matures in 4 years, makes annual coupon payments of 4.0%, and offers a yield

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A government bond matures in 4 years, makes annual coupon payments of 4.0%, and offers a yield of 2.0% compounded per year.

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a. Suppose that one year later the bond still yields 2.0%. What return has the bondholder earned over the 12-month period?

(Do not round intermediate calculations . Enter your answer as a percentage rounded to 2 decimal places.)

Rate of return? %

b. Now suppose the bond yields 1.0% at the end of the year. What return did the bondholder earn in this case?

(Do not round intermediate calculations . Enter your answer as a percentage rounded to 2 decimal places.)

Rate of return ? %

Related Book For answer-question

Introduction to Corporate Finance What Companies Do

ISBN: 978-1111222284

3rd edition

Authors: John Graham, Scott Smart

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Posted Date: Apr 29, 2023 09:49 AM

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A government bond matures in 4 years, makes annual coupon payments of 4.0%, and offers a yield

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a If the bond still yields 20 after one year it means that the bondholder has earned the coupon paym... View the full answer

Introduction to Corporate Finance What Companies Do

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