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5. Exactly two years ago, you purchased at par, a 10 year 10 percent coupon bond, face value $1000 that pays annual interest. Today the
5. Exactly two years ago, you purchased at par, a 10 year 10 percent coupon bond, face value $1000 that pays annual interest. Today the market rate of interest is 6 percent and you are considering selling the bond. a. What was the market rate of interest at the time you purchased the bond? b. Suppose you wish to sell the bond today i. How much should you sell the bond for? li. What is the current yield on the bond? iii. What will be your holding period return (yield) on the bond? C. Suppose your friend offers you a price of $1,125 for the bond. What you be willing to sell the bond to him/her? Explain your
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