Calculate the terminal wealth and annualized yield

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Face value =$1,000, coupon rate = .06, maturity = 11 yrs, market yield = 0.074, duration = 8.0 yrs. Suppose that immediately after you purchase the bond, all interest rates decline from .074 to .064 and remain at .064 thereafter (remember that bond yields, like these interest rates, are expressed as annual yields compounded semiannually; r declines from .037 to .032).

Calculate the terminal wealth and annualized yield if this bond is held to maturity.

Reference no: EM13917964

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