Anyone know why we go from N=3 to N=2? Will there ever be a case when we just keep it at N=3?
They use N = 3 to calculate the future value of the coupons reinvested to Year 3 (when the sale happens).
Then they use N = 2 to calculate the PV of the bond at Year 3 (because the bond has 2 years to maturity).
It will be N = 3 all the way if it is a 6-year bond and they want to sell the bond in Year 3.
Thank you so much