Considering purchasing a savings bond

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Reference no: EM13736982

You are considering purchasing a savings bond that will pay $100 in five years. The market interest rate currently is 3% per year.

(a) What should you be willing to pay to purchase this bond today?

(b) Suppose the interest rate goes up next year, to 4% per year. What will happen to the price of the bond? Explain.

Reference no: EM13736982

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