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1) A bond with annual coupon payments and with 8 years to mature is selling for $1,134.20 (assuming a face value of $1000). It has

1) A bond with annual coupon payments and with 8 years to mature is selling for $1,134.20 (assuming a face value of $1000). It has a yield to maturity of 2%. What is the bond's annual coupon rate?

2) Consider a bond with a 2% annual coupon rate and with yield to maturity of 3.5%. If the bonds YTM remains constant, then in one year, will the bond price be higher, lower, or unchanged? Why?

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