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You can buy or sell a 3.5% $1000 par U.S. Treasury Note that matures in exactly 6 years (meaning it pays (.035/2)*1000 coupon payments every 6 months, starting 6 months from now through maturity, and repays principal on maturity), with a current yield to maturity of 4% (assume a flat term structure of interest rates), for a price today of $973. Assume semi-annual compounding and semi-annual coupon payments. What is it currently worth? Would you buy it or sell it - why?

Financial Management, Finance

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