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You purchased a 15-year, 4.8 percent coupon bond that was priced at 102.594% of par TWO years ago. The bond paid tri-annual coupons (i.e., once every four months). Right after you purchased the bond, interest rates rose to 6.0 percent and remained unchanged since then. You liquidated your position by selling the bond for its market price at the end of the 2-year horizon. Calculate the (annual) rate of return realized on your investment.

You purchased a 15-year, 4.8 percent coupon bond that was priced at 102.594% of par TWO years ago. The bond paid tri-annual coupons (i.e., once every four months). Right after you purchased the bond, interest rates rose to 6.0 percent and remained unchanged since then. You liquidated your position by selling the bond for its market price at the end of the 2-year horizon. Calculate the (annual) rate of return realized on your investment.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You purchased a 15-year, 4.8 percent coupon bond that was priced at 102.594% of par TWO years ago. The bond paid tri-annual coupons (i.e., once every four months). Right after you purchased the bond, interest rates rose to 6.0 percent and remained unchanged since then. You liquidated your position by selling the bond for its market price at the end of the 2-year horizon. Calculate the (annual) rate of return realized on your investment.
Transcribed Image Text:You purchased a 15-year, 4.8 percent coupon bond that was priced at 102.594% of par TWO years ago. The bond paid tri-annual coupons (i.e., once every four months). Right after you purchased the bond, interest rates rose to 6.0 percent and remained unchanged since then. You liquidated your position by selling the bond for its market price at the end of the 2-year horizon. Calculate the (annual) rate of return realized on your investment.
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