Currently has one bond issue outstanding

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Currently has one bond issue outstanding. This bond pays a coupon rate of 10% ($100 p/yr) and matures in 5 years, and has a par value of $1,000. If you require a 14% rate of return. This bond pays a coupon rate of 10% ($100 per year) and matures in five years, and has a par value of $1,000. Suppose interest rates were to drop from 14% to 8% tomorrow. What percentage increase in value would occur for each bond due to the drop in interest rates? (Calculate the capital gain of each bond and express it as a percentage of the bond value obtained above.)

Reference no: EM131021466

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