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1. Suppose a bond pays $1,000 each year for five years, starting a year from today, and then repays its principal of $40,000 five years
1. Suppose a bond pays $1,000 each year for five years, starting a year from today, and then repays its principal of $40,000 five years from today. What is the value of the bond if interest rates are 2% per year? a. What is the present value of the first payment? b. Solve for the value of the bond. C. What is the value of the bond directly after the first payment if interest rates stay the same? d. What is the value of the bond now and after the first payment year if interest rates are 2.5% instead of 2%
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