Q2: Your uncle Sam asks for your advice on the comparison of the two following bonds: Bond
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Question:
Q2: Your uncle Sam asks for your advice on the comparison of the two following bonds:
Bond A: a 10-year, 10% annual coupon bond
Bond B: a 10-year, 10% semiannual coupon bond
Please answer the following questions and briefly provide your reasonings.
- If all else equal, which bond you would prefer to buy and why? (3 points)
- If the proper price for this semiannual bond is $1,000, what would be the proper price for the annual coupon bond? (5 points)
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