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3. (20') Suppose that an investor with a 4-year investment horizon is considering purchasing a 10-year 5% coupon bond selling at par. The investor expects that she can reinvest the coupon

payments at an annual interest rate of 8% and that at the end of the investment horizon 6-year bonds will be selling to offer a yield to maturity of 11%. What is the total return for this bond?

Fig: 1