[pic] If the stand to maturity doesnt change, then you will be able to reinvest all(prenominal) coupon at 6 percent. [pic] The upshot of this table is that purchasing $1,000 of any of the three bonds will provideâ"10 years from nowâ" blood lineing for your future obligation of $1,790.85, provided the market interest rate of 6 percent doesnt change. Now meditate that, immediately after you purchase the bonds, the yield to maturity changes to few new value and stays there. This change will obviously affect the calculation we just did. For example, if the yield falls to 5 percent, the table will now look as follows: [pic] Thus, if the yield falls, bond 1 will no longer fund our obligation, whereas bond 3 will overfund it. Bond 2s ability to fund the obligationâ"not surprisingly, in date of the fact that its duration is exactly 10 yearsâ" barely changes. [pic] If you want to get a full essay, order it on our website: Orderessay
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