Disregarding the possibility of default

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Reference no: EM131501134

A 20-year 10% corporate bond was issued 10 years ago. You purchased this bond today, when it was trading to yield 7%. Next day, the yield increased to 12% and remained at this level indefinitely. Disregarding the possibility of default, if you decide to sell the bond just before its maturity date, you will have incurred a capital loss.

Is this statement true or false? Why?

Reference no: EM131501134

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