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An n-year 1,000$ par value bond with 3.25% annual coupons is purchased at a price to yield an annual effective interest rate of i. You
An n-year 1,000$ par value bond with 3.25% annual coupons is purchased at a price to yield an annual effective interest rate of i. You are given:
(i) If the annual coupon rate had been 4.50% instead of 3.25%, the price of the bond would have increased by 100$.
(ii) At the time of the purchase, the present value of all the coupon payments is equal to the present value of the bond's redemption value of 1,000$.
Calculate i.
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