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Suppose you purchase a 30-year Government of Canada bond with a 5% annual coupon and...

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Finance

Suppose you purchase a 30-year Government of Canada bond with a 5% annual coupon and $1,000 face value, initially trading at par. In 10 years' time, the bond's yield to maturity has risen to 7% (EAR).

a) if you sell the bond now, what IRR will you have earned on your investment in the bond? State the actual IRR answer.

b) If instead you hold the bond to maturity, what IRR will you earn on your investment in the bond? State the actual IRR answer.

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