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(7) A bond pays a coupon rate of 5% annually and a discount rate of 2% is used by investors. The par value is $1000.

(7) A bond pays a coupon rate of 5% annually and a discount rate of 2% is used by investors. The par value is $1000. (a) If the bond has three years remaining until maturity, calculate the value of the bond today. (6%)

(b) Now assume that the discount rate changes for the final year to be 8%, calculate the value of the bond today. (8%)

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