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Assume all rates are annualized with semi-annual compounding. Please be explicit about how you derive your results and round to four decimals after the comma. Suppose that at time 0 you buy a

Assume all rates are annualized with semi-annual compounding. Please be explicit about how you derive your results and round to four decimals after the comma. Suppose that at time 0 you buy a 10%-coupon 20-year bond priced at par, and at time 0.5 you sell this bond at a yield of 12%.
a. What is your time 0.5 payoff per $1 of initial investment?
b. What is the rate of return on your investment (annualized, with semi-annual compounding)?

* 0.5 means half of the year

 

Jun 27 2021 View more View Less

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