Calculate the price for which trustworthy bank should see

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Problem 1: Imagine you get a 14% on a 0-coupon bond including a par value of $1000 and 6 years to maturity. What is the price that you should be willing to pay for this bond?

Problem 2: Now please choose between either investing in a 1-year municipal bond with a 7% yield or a 1-year corporate bond with a 11% yield. Consider a marginal tax rate of 30% and explain which bond you would rather invest in (assuming there is no other difference between these 2 bonds).

Problem 3: The "Trustworthy Bank" acquired bonds for $106MM (million) with a par value of $100MM, 3 years until maturity and a 14% annual coupon rate and believes in a 12% expected return one year from now. Please calculate the price for which the Trustworthy Bank should see these bonds one year from now?

Reference no: EM132844087

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