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Computation question: Please show your calculation in the following question step by step. A borrower can issue a 3-year discount bond with a face value
Computation question: Please show your calculation in the following question step by step.
A borrower can issue a 3-year discount bond with a face value of $1000 and sell it for price of $800. Calculate the yield to maturity for the discount bond. Alternatively, the borrower could issue a coupon bond with a face value of $800. What is the coupon rate the bond issuer have to offer to sell the coupon bond at a price of $800, if the market demands a YTM for the coupon bond that equals to the YTM of the discount bond?
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