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5. Today, 10-year treasury notes are issued at par with coupon rate 5.5% per year. Also, the credit spread between the 10-year treasury notes and

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5. Today, 10-year treasury notes are issued at par with coupon rate 5.5% per year. Also, the credit spread between the 10-year treasury notes and the 10-year BBB rated corporate bonds is 2%. As a CFO of the company whose credit rate is BBB, you would like to issue a 10-year bond with face value $10,000 and annual coupon rate 7%. Assuming that the yield is fixed throughout 10 years and coupon is paid annually, what should be the price of bond you are going to issue today? [6 points)

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