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7) You just purchased a bond that matures in 5 yrs. The bond has a face value of R1 000 and has a 8 annual

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7) You just purchased a bond that matures in 5 yrs. The bond has a face value of R1 000 and has a \8 annual coupon. The bond has a current yield of \8.21. What is the bond's yield to maturity? (5) Question 8 (8 marks) Suppose Ford Motor Company sold an issue of bonds with a \\( 10 \\mathrm{yr} \\) maturity, R1 000 par value, \10 coupon and semi-annual payments. 8.1) Two years after the bond was issued, the going rate of interest on similar bonds fell to \6. At what price will the bond sell? (3) 8.2) Suppose that two years after the initial offering, similar bonds interest rates had risen to \12. At what price will the bonds sell? (3) 8.3) Suppose the conditions in 8.1) existed and suppose further that interest rates remained at \6 for the next 8 yrs. What would happen to the price of the bond over time. (2)

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