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Question:
One year ago, an investor purchased a 10-year, $1,000 par value, 8% semiannual coupon bond with an 8% yield to maturity. Now, one year later, interest rates remain unchanged at 8%. If the investor sells the bond today (immediately after receiving the second coupon payment, and with no transaction costs), he will have:
A
no capital gain or loss.
explanation
At the time of purchase, the coupon rate = the market rate, so the bond traded at par. One year later, with interest rates unchanged, the bond would still trade at par, or $1,000. Thus, there would be no gain or loss from the sale.
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