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A $1,000 par value bond with 4% annual coupons is purchased at a discount ten years prior to the maturity date. The proceeds of the
A $1,000 par value bond with 4% annual coupons is purchased at a discount ten years prior to the maturity date. The proceeds of the coupons are invested in a savings account with a 5% effective annual rate of interest. The effective yield on the ten-year investment (including the bond and the savings account) is 6%.
What is the book value of the bond one year after purchase?
A
< $848
B
$848 but < $852
C
$852 but < $856
D
$856 but < $860
E
$860
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