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How much would you be prepared to pay for a $ 1 , 0 0 0 face value bond with a 1 0 % coupon,

How much would you be prepared to pay for a $

1, 000

face value bond with a

10 %

coupon, annual payments, and

5

years to maturity if the market interest rate is

12 % ?

Show in Excel how the answer changes if the coupon is changed to semi

-

annual.

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