What is the expect total return

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Bond will be held for 10 years and will sell the bond at a 4.7% required yield. During the holding period, the reinvestment rate is expected to be 4.3% until the end of year 7, then rise to 4.6% until the end of year 10.

a) How much of the future value is due to coupons received?

b) How much of the future value is due to reinvestment interest?

c) How much of the future value is due to a capital gain or loss?

d) What is the expect total return over the 12-year investment horizion?

Reference no: EM132998712

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