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2. Consider a bond paying a coupon rate of 12% per year quarterly when the market interest rate is only 6% per quarter period. The
2. Consider a bond paying a coupon rate of 12% per year quarterly when the market interest rate is only 6% per quarter period. The bond has 5 years until maturity. NOTE: PLEASE SHOW HOW YOU COMPUTE EACH OF THE ITEMS. a) Compute the bond's price for today and 3 months from now after the next coupon is paid. (25p) b) What is the total (3-month) rate of return on the bond? (10p)
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