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You are faced with two bonds ABC and XYZ that are viewed by investors as having the same risk. If ABC has a 10% coupon
You are faced with two bonds ABC and XYZ that are viewed by investors as having the same risk. If ABC has a 10% coupon rate, 10 years to maturity, pays coupon semi- annually and is traded at par. XYZ has 10 years to maturity, pays coupon semi-annually and is traded at a discount. The coupon rate for XYZ bond should be: Higher than 10% Could be higher or lower, there is not enough information to decide. Equal to 10% Lower than 10%
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