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(0) ABC Inc has issued 20-year bonds that make semiannual coupon payments at a rate of 9 percent. The current market rate for similar securities
(0) ABC Inc has issued 20-year bonds that make semiannual coupon payments at a rate of 9 percent. The current market rate for similar securities is 8 percent. What is the current market value of one of these bonds? Would you purchase one of these bonds if it was offered to you at par value $1,000? Why? What do you expect would happen to the bonds price if rates in the market (i) decrease percent or (ii) increase ? What is your realized yield if you purchase the bond at the current market value and sell it after 5 years at $950? Explain your answer using the appropriate equations
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