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The Canadian XYZ bond is currently trading at $980. This bond has a 7 year maturity and a face value of $1000. It offers an

The Canadian XYZ bond is currently trading at $980. This bond has a 7 year maturity and a face value of $1000. It offers an annual coupon rate of 5.25%. The risk-free rate is 1.75%.

a. Determine the risk premium required by the investors.

b. Determine whether the XYZ bond is at a discount or a premium.

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