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Assume that you are considering the purchase of a 20-year, bond with an annual coupon rate of 10%. The bond has a par value of
Assume that you are considering the purchase of a 20-year, bond with an annual coupon rate of 10%. The bond has a par value of $1,000, and it makes annual interest payments. If you require an 8% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Explain why the price is different from the par value.
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