How do you explain the rise in the yield on these bonds

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Reference no: EM131314735

Suppose that 3 years ago you purchased from the government of Eldorado 5-year saving bonds at a yield to maturity of 4%. However, currently as two years remain to maturity, they are trading at a yield of 20%. Assuming that the interbank rate in Eldorado has remained throughout this period around 3%, how do you explain the rise in the yield on these bonds?

Reference no: EM131314735

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