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Bond M promises to pay an annual coupon of 5%, BondN promises to pay an annual coupon of 2.25%. Maturity of both bonds is 10
Bond M promises to pay an annual coupon of 5%, BondN promises to pay an annual coupon of 2.25%. Maturity of both bonds is 10 years. The risk-free rate is 0.75%, the credit spread of Company M is 2%, the credit spread of Company N is 5%. a)What are the prices of the two bonds?b)Why would anyone invest in Neven thoughit is riskier than M but pays a lower coupon than M?
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