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You have got some money to invest. There are only two investment opportunities: (1) 10% coupon bond issued by Apple (Bond A) with a face
You have got some money to invest. There are only two investment opportunities: (1) 10% coupon bond issued by Apple (Bond A) with a face value of $1000, and (2) 8% coupon bond offered by Big5 (Bond B) also with a face value of $1000. Both bonds mature exactly in two years from now. Assume that there is no future uncertainty.
a. Bond A is priced at $1000. What is its yield to maturity? [5 points]
b. Bond B is priced at $900. What is its yield to maturity? [5 points]
c. Will you prefer buying A to B? Why or why not? [4 points]
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