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16. Suppose that an investor with a 5-year investment horizon is considering purchasing a 7-year 9% coupon bond selling at par. The investor expects that she can reinvest the coupon payments

at an annual interest rate of 9.4% and that at the end of the investment horizon 2-year bonds will be selling to offer a yield to maturity of 11.2%. What is the total return for this bond?

Fig: 1