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a. If the interest rate is 7%, what is the present value of a security that pays you $850 next year and $1212.50 three years

  • a. If the interest rate is 7%, what is the present value of a security that pays you $850 next year and $1212.50 three years from now? 
  • b. If this security sold for $1700, is the yield to maturity greater or less than 7%? Illustrate your answer by estimating a range of the yield to maturity using trial and error method (provide at least two iterations).

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