Bond will be held for 10 years and will sell the bond at a 4.7% required yield.

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Bond will be held for 10 years and will sell the bond at a 4.7% required yield. During the holding period, the reinvestment rate is expected to be 4.3% until the end of year 7, then rise to 4.6% until the end of year 10.

(a) What is the future value of the coupons and reinvestment interest?

(b) What is the expected sales price of the bond?

(d) How much of the future value is due to coupons received?

(e) How much of the future value is due to reinvestment interest?

(f) How much of the future value is due to a capital gain or loss?

(g) What is the expect total return over the 12-year investment horizion?

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Posted Date: Sep 24, 2021 12:29 AM

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Bond will be held for 10 years and will sell the bond at a 4.7% required yield.

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Expert Answer:

a At the end of the 10year holding period the bond will have earned 470 in interest from the coupons ... View the full answer

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