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A six-year government bond makes annual coupon payments of 4% and offers a yield of 8% annually compounded. Suppose that one year later the bond
A six-year government bond makes annual coupon payments of 4% and offers a yield of 8% annually compounded. Suppose that one year later the bond still yields 8%. What should be the prices in year zero and year 1. Now suppose that the bond yields 6% after year one. What is the bond price would be? The face value of the bond is 1000.
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