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Consider two bonds. A consol with yield 10%. A two-year coupon bond is selling at par...

  1. Consider two bonds. A consol with yield 10%. A two-year coupon bond is selling at par (i.e. face value) has yield to maturity 10%. Both bonds pay coupons yearly. At the end of the first year, the yields on all bonds fall to 5%. Which bond earns a higher RET?
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