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Posted on Sep 05, 2024

The Altoona Company issued a 25-year bond five years ago with a face value of $1,000. The bond pays interest semiannually at 10% annual rate.

1. What is the bond's price today if the interest rate on comparable new issues is 12%?

2. What is the price today if the interest rate is 8%?

3. Explain the results of parts(1) and (2) in terms of opportunities available to investors.

4. What is the price today if the interest rate is 10%?

5. Comment on the answer to part (4)

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