Calculate the new price of coupon bond

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a) Calculate the price of a $1000 face value five year coupon bond when the yield to maturity is 5%, and the coupon rate is 7%.

b) Now suppose that the yield to maturity falls to 4%. Calculate the new price of this coupon bond.

c) Suppose you purchased the bond at it original price (yield to maturity = 5%) held it for one year (collected one coupon payment) and sold it at the new price (part b). What is your rate of return?

Reference no: EM133134432

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