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Melisandre buys a 21 year, 5100,000.00 face value. 4.250% coupon bond. The bond is priced to yield 4) = 8.000%, and is secured by a
Melisandre buys a 21 year, 5100,000.00 face value. 4.250% coupon bond. The bond is priced to yield 4) = 8.000%, and is secured by a sinking fund (set up by the issuer with monthly deposits), that earns 7.500% compounded semi-annually. On default, Melisandre claims the balance in the sinking fund. How much does she lose if the issuer defaults after 17 years (just after making their coupon payment, and sinking fund deposit). O a. $22,281.68. O b. $21,108.96 Oc$19,545.33. Od $16,613.53. O e $20,131.69
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