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Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually. There are 20 years remaining until maturity. You have
Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually. There are 20 years remaining until maturity. You have expectations that in 5 years the YTM on a 15-year bond with similar risk will be 10%. You plan to purchase the bond now and hold it for 5 years. Your required return on this bond is 11%. How much would you be willing to pay for this bond today? (hint: find the expected bond value in 5 years) Select one:
a. $ 608
b. $ 915
c. $ 849
d. $ 854
e. $ 881
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