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5. (5 points) You email your broker to get a price quote on Bond A: Bond A: Maturity 8 years, Coupon 12% (semi-annual). Face value
5. (5 points) You email your broker to get a price quote on Bond A: Bond A: Maturity 8 years, Coupon 12% (semi-annual). Face value = $100. However, they mistakenly send you a quote for Bond B instead: Bond B: Price $75, Maturity-8 years, Coupon = 2% (semi-annual), Face value = $100. You also know that the 2 year spot rate is 52-5%, and the forward rate from year 2 to year 8 is f2.8 6%. What should the price of Bond A be? (Assume semi-annual compounding.)
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