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Keith Richards stockbroker recommends buying a $1,000 par value, 25-year bond that pays a 14% coupon. The current yield to maturity on similar bonds in
Keith Richards stockbroker recommends buying a $1,000 par value, 25-year bond that pays a 14% coupon. The current yield to maturity on similar bonds in the marketplace is 12%. His stockbroker tells him the bond costs $1200. a) Calculate the price of the bond. The price of the bond is 1,156.86 b) Is Keiths stockbroker quoting him the fair price? Briefly explain.
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