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Effective interest rate r = 10% Contractual interest rate i = 9% Period (years) n = 9 Par (maturity) value par = $1,000,000 Annual Interest

Effective interest rate r = 10%
Contractual interest rate i = 9%
Period (years) n = 9
Par (maturity) value par = $1,000,000
Annual Interest Payments int_pay =

$90,000

A. Compute Present Value of Par

B. Compute Present Value of Interest Payments

C. Compute Selling Price of the Bond (S/B $942,410)

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