5y risk free bond with a starting yield of 20% and flat yield curve. Assume you sell it every year after 1 year and buy a new 5y bond. In scenario 1 yield declines 2% per year for ten years. In scenario 2 yield is constant. Which scenario has higher returns after a decade?
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i know nothing about bonds but the question was phrased in such a way that made the answer obvious.
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were you good at passing tests at school
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