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Consider a bond that promises to pay coupons annually for 10 years. The face value is $1000. The risk- free rate is 2% (annually) a)

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Consider a bond that promises to pay coupons annually for 10 years. The face value is $1000. The risk- free rate is 2% (annually) a) Suppose the bond is not risk-free. As a result, the bond promises to pay coupons annually at a coupon rate of 3%. The bond is originally introduced at a price equal to its face value, $1000. What is the annual rate of return implied discount rate yield-to-maturity) of the bond b) Two years have passed, the bond has not defaulted and the second coupon has just been detached. The beginning of year 2 is now considered to be year 0. (i) If the market price of the bond is still $1000, what is the yieldC-to-maturity of the bond (ii) If the market price of the bond dropped to $900, what is the yield[-to-maturity] of the bond

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