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Question Two: (25 marks) An annual bond has a face value of $1,000, makes an annual coupon payment of $25 per year, has a discount

Question Two: (25 marks)

An annual bond has a face value of $1,000, makes an annual coupon payment of $25 per year, has a discount rate per year of 9.0%, and has 8 years to maturity. Calculate the bond price in three equivalent ways.

  1. First, calculate the bond price as the present value of the bond's cash
  2. flows the long way
  3. Second, use a formula for the bond price.
  4. Third, use Excel's PV function for a bond price.

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