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Q1 (a)Suppose a 10 percent coupon, $1,000 bond with ten years left to maturity is selling for $1,200.What is the yield, assuming that interest is
Q1
(a)Suppose a 10 percent coupon, $1,000 bond with ten years left to maturity is selling for $1,200.What is the yield, assuming that interest is paid semi-annually?(3 marks)
(b)Assume that the bond in (a) above pays interest quarterly.What would the bond sell for, given that the investor/market wants to earn the same effective yield as calculated in (a)?
(2 mark)
(c)Assume that the bond in (a) above pays interest monthly.What would the bond sell for, given that the investor/market wants to earn the same yield as calculated in (a)? (2 marks)
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