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Sydneypurchasesanewlyissued,twoyeargovernmentbondwithaprincipalamountof $10,000andacouponrate(a.k.a.interestrate)of6%paidannually.Oneyearbeforethebonds matures(andafterreceivingthecouponpaymentforthefirstyear),Sydneysellsthebondinthe bondmarket.Whatprice(roundedtothenearestdollar)willSydneyreceiveforhisbondifthe prevailingcouponrateonanewlyissuedbondis5%? I see the answer as $10,095 but how do you get that answer?
Sydneypurchasesanewlyissued,twoyeargovernmentbondwithaprincipalamountof
$10,000andacouponrate(a.k.a.interestrate)of6%paidannually.Oneyearbeforethebonds
matures(andafterreceivingthecouponpaymentforthefirstyear),Sydneysellsthebondinthe
bondmarket.Whatprice(roundedtothenearestdollar)willSydneyreceiveforhisbondifthe
prevailingcouponrateonanewlyissuedbondis5%?
I see the answer as $10,095 but how do you get that answer?
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