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Bill buys a 10-year $1000 par value 6% bond with semiannual coupons. The price assumes a nominal yield of 4%, compounded semiannually. The bond is
Bill buys a 10-year $1000 par value 6% bond with semiannual coupons. The price assumes a nominal yield of 4%, compounded semiannually. The bond is redeemable after 10 years at par. (a) Compute the bond's price. (b) As Bill receives each coupon payment, he immediately puts the money into an account earning interest at an annual effective rate of 7%. At t = 10 years, he deposits the last coupon and the redemption value of the bond. What is his account balance at t = 10? (c) What is Bill's annualized rate of return on his investment in the bond
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