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Assume a bond with a 10% annual rate has 8 years left to maturity when market rates are at 12%. Assume semi-annual payments. What is
Assume a bond with a 10% annual rate has 8 years left to maturity when market rates are at 12%. Assume semi-annual payments. What is the price of the bond at 3 different points in time - today, in 1 year, and in 2 years.
Is this a discount or premium bond, and what do you notice about the relationship between the price and maturity value (FV) over time?
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