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Question
A bond that you held to maturity had a realized return of 8%, but when you bought it, it had an expected return of 6%. If no default occurred, which one of the following must be true?
A. The bond was purchased at a premium to par.
B. The coupon rate was 8%.
C. The required return was greater than 6%.
D. The coupons were reinvested at a higher rate than expected.
E. The bond must have been a zero coupon bond.
Answer
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