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An investor has the following options: a. To buy a two-year $1,000 zero-coupon bond at a market price of $860. b. To buy a two-year
An investor has the following options: a. To buy a two-year $1,000 zero-coupon bond at a market price of $860. b. To buy a two-year $1,000 bond with an annual interest of 3% for $900. Assuming annual payments, which option do you think the investor should choose? (Hint: Base your answer on the yield to maturity concept.)
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