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Suppose a portfolio manager is considering the purchase of a patriot bond, a 10-year, 4%...

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Finance

Suppose a portfolio manager is considering the purchase of a patriot bond, a 10-year, 4% non-callable bond selling at $990.50per $1000 of par value. Assume also that the portfolio manager's investment horizon is 5years. The portfolio manager believes the reinvestment rate range can vary from 4% to 7% and the discount rate at the end of the investment horizon from 3% to 6%. Use 25 bps grids to compute the various return scenarios. Identify all the scenarios that generate less than 4% annualized return.

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