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Calculate the price if a 5% coupon, $1000 face value 5-year bond if the appropriate annual discount rates are 3% for the first 2 years
- Calculate the price if a 5% coupon, $1000 face value 5-year bond if the appropriate annual discount rates are 3% for the first 2 years and 8% for the final three years. Calculate this bonds yield to maturity or average annual yield. Calculate your return if you hold this bond for one year. If we assume the change in annual rates is due to expectations of inflation, what does the bond market thing inflation is going to do in the future? Please show all work and do not use excel or a finance calculator.
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