Calculate value of a bond that will mature in eight years

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Problem a) Calculate the value of a bond that will mature in 8 years' time and has a $1000 face value. The coupon interest rate is 9%p.a. paid annually and the bond investor's required rate of return is 12%.

Problem b) If the Market Price of the bond is $930, should the investor purchase the bond? (Give a reason for your answer.)

Problem c) Briefly explain how the 'peaches/lemons' problem relates to the securities market.

Reference no: EM132964489

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