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The XYZ Co. has a series of $1,000 par value bonds outstanding. Each bond pays interest semi annually and carries a coupon rate of 7%.
The XYZ Co. has a series of $1,000 par value bonds outstanding. Each bond pays interest semi annually and carries a coupon rate of 7%. Some bonds are due in 3 years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of
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a) The bonds with 3 years to maturity?
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b) The bonds with 10 years to maturity?
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c) Explain the relationship between the number of years until a bond matures and its price.
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