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This question is not cumulative (a) Bakersfield Corp. has issued consol bonds with annual coupon payments of $65. If the required rate of return on
This question is not cumulative (a) Bakersfield Corp. has issued consol bonds with annual coupon payments of $65. If the required rate of return on these bonds at the time they were issued was 7.5 percent, what was the selling price then? If the required return today is 8.5 percent, at what price you will be willing pay for the consols? (b) A pure discount bond matures in 15 years and will pay $1,000 at maturity. If the YTM is 12.5%, what is the current price of this pure discount bond? (Done on paper)
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