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You are considering the purchase of two $ 1 , 0 0 0 bonds, both issued by Dalton Mining Company. Your expectation is that interest
You are considering the purchase of two $ bonds, both issued by Dalton Mining Company. Your expectation is that interest rates will drop and you want to buy the bond which provides the maximum capital gains potential. The first Dalton bond has a coupon rate of percent with four years to maturity, while the second has a coupon rate of percent and comes due five years from now. The market rate of interest discount rate is percent. Show work for partial credit.
You are considering the purchase of two $ bonds, both issued by Dalton Mining Company. Your expectation is that interest rates will drop and you want to buy the bond which provides the maximum capital gains potential. The first Dalton bond has a coupon rate of percent with four years to maturity, while the second has a coupon rate of percent and comes due five years from now. The market rate of interest discount rate is percent. Show work for partial credit.
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