Suppose that you purchase a bond that matures in five years, Ask an Expert

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Suppose that you purchase a bond that matures in five years and pays a 13.76% coupon rate annually. The bond is priced to yield 10%.

A. Show that the duration is equal to four years.

B. Show that if interest rates rise to 11% next year and your investment horizon is four years from today, you will still earn a 10% yield on your investment.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92715032

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