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Consider a one-year corporate bond with par value $1,000 and a coupon rate of 4%. Assume that the bond pays coupons annually (the first and
Consider a one-year corporate bond with par value $1,000 and a coupon rate of 4%. Assume that the bond pays coupons annually (the first and only coupon is paid in one year). Do you expect the price of the corporate bond to be above, below, or equal to $1,000
(a) if the relevant interest rate is 5%
(b) if the expected annual return on stocks (which are riskier than the corporate bond) is 4%
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