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Alice just bought a 5-year US Treasury bond priced at par with an 8% coupon rate. After she bought it, the Federal Reserve loosened credit
Alice just bought a 5-year US Treasury bond priced at par with an 8% coupon rate. After she bought it, the Federal Reserve loosened credit to stimulate the economy. As a result, similar bonds issued at par would have a 7% coupon. Estimate the price of Alice's bond now if its yield-to-maturity decreased to 7%.
Select one:
a. $925.00 to $950.00
b. Less than $900.00
c. $1,000.00 to $1,025.00
d. $1,050.00 to $1,075.00
e. $1,075.00 to $1,100.00
f. $900.00 to $925.00
g. More than $1,100.00
h. $975.00 to $1,000.00
i. $1,025.00 to $1,050.00
j. $950.00 to $975.00
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