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Suppose you buy a bond for $1,000 from the federal government, which guarantees that the owner will receive $80 a year forever (8 percent was
Suppose you buy a bond for $1,000 from the federal government, which guarantees that the owner will receive $80 a year forever (8 percent was the market rate of interest when you bought the bond). Suppose that, immediately after buying it, the market rate of interest rises to 10 percent. What is the new market value of your bond? (Show your work.)
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