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Firm ABC has a bond outstanding with a market price of $918.89 and a yield to maturity of 8%. Bond coupons are paid semi-annually, and
Firm ABC has a bond outstanding with a market price of $918.89 and a yield to maturity of 8%. Bond coupons are paid semi-annually, and the annual coupon rate is 6%. Due to the changing need of financing, the firm renegotiated the bond term with bond investors, and the two parties agreed to change the maturity date of the bond. After the news announcement, the price of the bond increased to $932.67. Assume the yield to maturity and coupon rate on the bond remain unchanged. Which of the following must be true? O A. The maturity of the bond decreased by 1 year. B. The maturity of the bond increased by 1 year. O C. None of the choices are correct. O D. The maturity of the bond decreased by 2 years. O E. The maturity of the bond increased by 2 years.
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