What is the expected total return for this bond

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Reference no: EM131016092

An investor has one-year investment horizon. She is considering purchasing a three-year coupon bond with $1000 par value and 8% annual coupon rate. The current annual yield to maturity is 8%. The investor expects that she can reinvest the coupon payments at an annual interest rate of 10%; and that at the end of that investment horizon, the then two year bond will be selling to offer an annual yield to maturity of 4%. What is the expected total return for this bond? Assume semiannual coupon payments and semiannual compounding.

Reference no: EM131016092

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