Decide coupon bond is better than zero-coupon bond

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An 8-year-bond with a face value of $10,000 offers an annual return of 3.5%.If there is no coupon payment, what is the current price of that bond?Suppose the firm decides to offer the same bond but with a coupon of $20 per year (paid at the end of each year).What is the new price for these bonds? Briefly explain why a firm might decide a coupon bond is better than a zero-coupon bond.

Reference no: EM131159981

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