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The PV of the Bond is $1027,75 To finance his business, Ben considers issuing a corporate bond. In cooperation with the local investment bank, Ben
The PV of the Bond is $1027,75
To finance his business, Ben considers issuing a corporate bond. In cooperation with the local investment bank, Ben decides to issue a bond with face value 1,000 $ and maturity of 3 years. The bond will earn a yearly coupon of 5% paid annually. Assume a 4% p.a. flat interest rate environment. (b) Assuming interest rate expectations are realized, will the bond price be higher, lower or unchanged one year from now? Explain. (2 Points) No calculations required! Please derive the Macaulay duration from the calculation of the Present Value of Bonds. In which unit is the Macaulay Duration measured? Explain the unit of the duration by transforming the formula accordingly
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