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Five years ago Constellation, Inc., sold an issue of 20-year $1000 par bonds to finance a new distribution terminal. The bonds pay 6.75% interest, semi-annually.
Five years ago Constellation, Inc., sold an issue of 20-year $1000 par bonds to finance a new distribution terminal. The bonds pay 6.75% interest, semi-annually. Todays required rate of return for similarly rated bonds is 7.17%. a) How much should these bonds sell for today? b) 3 years later, the required rate of return will be increased to 9%. What is the bond price at that time? c) If you buy the bond today and sell it after 3 years, what is your return?
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