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Calculate the total return for bond

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Reference no: EM132652168

Suppose an investor with a 6-year investment horizon purchased a 20-year bond paying an 8% annual coupon rate (making semiannual coupon payments) when the yield to maturity is 10%. The investor expects that he can reinvest the coupon at an annual interest rate of 5%. At the beginning of year 7, he expects the then yield to maturity will be 8%. What is the total return for this bond? Please clearly list the steps involved in the calculation.

Reference no: EM132652168

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