5. Calculating the bond price Mill Tower Corporation raises funds to build windpumps by issuing 3-year...
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5. Calculating the bond price Mill Tower Corporation raises funds to build windpumps by issuing 3-year bonds with a coupon rate of 4% and a face value of $1,400. Assume that the market interest rate for a 3-year bond issued by a firm like Mill Tower is currently the same as the coupon rate. The price of each of these bonds is , which means that the bonds sell at Suppose that the market interest rate for bonds that are similar to the MillTower bond has increased to 8%. The price of the Mill Tower bond changes to which means that it sells at Suppose that instead of rising, the market rate decreases from 4% to 3%. The new price of the bond changes to the bond sells at which means that 5. Calculating the bond price Mill Tower Corporation raises funds to build windpumps by issuing 3-year bonds with a coupon rate of 4% and a face value of $1,400. Assume that the market interest rate for a 3-year bond issued by a firm like Mill Tower is currently the same as the coupon rate. The price of each of these bonds is , which means that the bonds sell at Suppose that the market interest rate for bonds that are similar to the MillTower bond has increased to 8%. The price of the Mill Tower bond changes to which means that it sells at Suppose that instead of rising, the market rate decreases from 4% to 3%. The new price of the bond changes to the bond sells at which means that
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