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. A 1 2 - years 1 0 % coupon bond issued 2 years ago has $ 1 , 0 0 0 face value. a

. A 12-years 10% coupon bond issued 2 years ago has $1,000 face
value.
a. If the required rate of return for this bond is 10%, how much does
this bond sell for?
b. If one year later, market interest rate (r) increases to 12%, how
much can you sell this bond for? What is the percentage change
(increase/decrease) in price?
c. If instead, one year later interest rate decreases to 8%, how much
will you sell the bond for? What is the percentage change
(increase/decrease) in price?

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