Question
Let's use the intrinsic valuation approach to estimate what is the fair price for the following fixed income security: a bond with a 10-year maturity
Let's use the intrinsic valuation approach to estimate what is the fair price for the following fixed income security:
a bond with a 10-year maturity (will be repaid in 10 years), face value of 1 000 EUR (this amount of money will be repaid in 10 years time), and a coupon payment of 3% (investors are paid 3% of the face value each year).
Select all correct answers below (use the following template if the calculations are not straightforward).
a.
bond fair price equals to 1 000 if the required rate of return equals 3%
b.
bond fair price equals to 846 if the required rate of return equals 5%
c.
bond fair price equals to 1 090 if the required rate of return equals 2%
d.
bond fair price equals to 1 000 if the required rate of return equals 0%
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