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Jeffry is a fixed income analyst. He analyzes three bonds (Bond A, Bond B, and Bond C). He believes that the appropriate market bond yield
Jeffry is a fixed income analyst. He analyzes three bonds (Bond A, Bond B, and Bond C). He believes that the appropriate market bond yield is 8 percent per annum. He documents the following information:
A | B | C | |
Face Value ($) | 1000 | 2000 | 3000 |
Issued | 01 January 2020 | 01 January 2020 | 01 January 2020 |
Maturity | 01 January 2030 | 01 January 2040 | 01 January 2040 |
Coupon Rate | 6% | 8% | 10% |
Coupon payment | quarterly | semi-annual | annual |
Price ($) | 840 | 1970 | 3750 |
a) Evaluate the potential mispricing of those three bonds
b) Explain further consideration when Jeffry attempts to value those bonds
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