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Problem 5 : Long - term Horizons Bond A with maturity 2 5 years and F = $ 5 , 0 0 0 pays an

Problem 5: Long-term Horizons
Bond A with maturity 25 years and F = $5,000 pays an annual coupon X. It has yield to maturity
12% and currently sells for $5,235. Bond B with F = $2,000 and an annual coupon of $250 has
also maturity 25 years.
1. Is the annual coupon of bond A above, below or exactly $600?
2. Price coupon bond B.
3. What should the annual coupon of B be, in order for it to sell at par?

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