Question: A three-year bond has 8.0% coupon rate and face value of $1000. The yield to maturity on the bond is 10%. Now, suppose that the

A three-year bond has 8.0% coupon rate and face value of $1000. The yield to maturity on the bond is 10%. Now, suppose that the YTM is lowered by 2% two year after the issue of the above bond and is maintained at the level until the maturity of the bond. Graph the approximate trace of the bond prices over the 3 years.

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