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You purchase a new issue of a 10-year coupon-bond for 100S. The coupon rate and yield are both 2%, with coupons paid at the end of each year. One year later market interest rates increase and the new yield of the bond becomes 4%. You collect the first coupon payment and immediately sell the bond to use the money for something else. How much total amount of dollars do you have from collecting the coupon and selling the bond? What is your effective interest-rate of return?

Financial Management, Finance

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