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Assume a corporate bond has a face value of $1,000 and mature in eight years. The bonds pay 5% interest in the first four years
Assume a corporate bond has a face value of $1,000 and mature in eight years. The bonds pay 5% interest in the first four years and 7% thereafter. Interest is paid semi-annually. Suppose you buy the bond for $900 and hold it to maturity. a. What is your return on this bond? (12 marks) b. If your required rate of return is 7%, discuss whether you should invest in the bond and why or why not.
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