Question: Assume you invest in a 6 year, 9% bond that pays annual interesr and that the interest rate right now is 9%.
What is the duratio of this bond? How much money would you collect if you reinvest all payments in a bond that also pays 9% and sell the bond after 5 years? How much money would you make if you immediately after you buy the bond, interest rates go up to 10% and you reinvest at 10% and sell the bond after 5 years? What rate of return will you earn after 6 years if you spend all interest payments?