Calculate the realized yield of this investment

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Reference no: EM131178979

You bought a bond with the following characteristics:

$1,000 par value 11% coupon

Semiannual payments 36 years to maturity

Bond was priced to yield 12%.

For the first three years after you bought the bond interest rates remained constant at 6%. Then interest rates dropped to 5.4% and remained at that rate for five years. Then rates dropped further to 4.8% and remained at that rate for two more years. Rates dropped even lower to 4% and remained at that rate until the bond matured. Assume that all coupon interest payments were reinvested at the prevailing markets rate(s). Calculate the realized yield of this investment.

Reference no: EM131178979

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