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Most bonds are first issued in RM1000 or RM5000 denominations. Coupon rates are typically set at or near yield on similar bonds in market. Suppose

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Most bonds are first issued in RM1000 or RM5000 denominations. Coupon rates are typically set at or near yield on similar bonds in market. Suppose that a RM1000 par value bond with 6 years maturity, annual payments of 8 percent. Assume that the market yield immediately rises to 9 percent. Compute the bond price today. It is below, above or at par? Explain. (7 marks) [Total: 30 marks]

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