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By year-end, remaining maturity is 29 years. If the yield to maturity were still 8%, the bond would still sell at par and the holding-period return would be 8%. At a higher yield, price and return will be lower. Suppose the yield to maturity is 8.5%. With annual payments of $80 and a face value of $1,000, the price of the bond is $946.70 ( n = 29; i = 8.5%; PMT = $80; FV = $1,000). The bond initially sold at $1,000 when issued at the start of the year. The holding-period return is

which is less than the initial yield to maturity of 8%.

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