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Consider a bond that promises the following cash flows. The required discount rate is 13%. Consider a bond that promises the following cash flows. The
Consider a bond that promises the following cash flows. The required discount rate is 13%.
Consider a bond that promises the following cash flows. The required discount rate is 13%. Year 0 1 2 34 Promised Payments 190 210 280 230 You plan to buy this bond, hold it for 342 years, and then sell the bond. (a) What total cash will you receive from the bond after the 342 years? Assume that periodic cash flows are reinvested at 13%. (b) If immediately after buying this bond, all market interest rates drop to 12% (including your reinvestment rate), what will be the impact on your total cash flow after 34 yearsStep by Step Solution
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