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An investor has the following two options: To buy a two-year $1,000 zero-coupon bond at a market price of $860, or: To buy a two-year
An investor has the following two options:
- To buy a two-year $1,000 zero-coupon bond at a market price of $860, or:
- To buy a two-year $1,000 bond with an annual interest of 3% at a market price of $900.
Assuming annual coupon payments, which option do you think the investor should choose? Explain why.
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