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Suppose Cisco sold a 15-year maturity bond issued at a $1.000 par value and a 7 % coupon rate. Interest is paid semiannually. If the
Suppose Cisco sold a 15-year maturity bond issued at a $1.000 par value and a 7 % coupon rate. Interest is paid semiannually. If the going market interest rate is 10 percent. a. At what price would the bond be sold today? b. Suppose that the interest rate increases by 15 % for the next 10 years. What would happen to the price of the Cisco bonds over time? c. Now Suppose, the bond is callable after 8 years when the market interest rate is 15%. At what price the issuer will call the bond (Hint: bond price at callable) and what is the total return of the bond?
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