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# Michael buys a bond with 2 years to maturity, face value \$500 and coupon rate 5%. At the time of purchase the yield is 8%. After 1 year he sells the...

Michael buys a bond with 2 years to maturity, face value \$500 and coupon rate 5%. At the time of purchase the yield is 8%. After 1 year he sells the bond to April when yields are 5%.
• What price does April pay for the bond?
• What is Michael’s rate of return?
• What is the current yield and rate of capital gain at the time Michael sells?
• If April holds the bond until maturity what rate of return does she get?
• What would Michael’s rate of return be if the bond had 3 years to maturity?

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Michael buys a bond with 2 years to maturity, face value \$500 and coupon rate 5%. At
the time of purchase the yield is 8%. After 1 year he sells the bond to April when yields
are 5%.
• What price...

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