Pricing bonds at a premium

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Reference no: EM132069694

PRICING BONDS AT A PREMIUM -

(a) Calculate the price of a 10 percent coupon (annual coupons), $1,000 face value 20-year bond if the appropriate discount rate is 3 percent. Show your return if you hold this bond for three years and discount rates don't change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).

PRICING BONDS WITH SEMI-ANNUAL COUPON PAYMENTS -

(b) Calculate the price of a 4 percent coupon (annual coupons), $100 face value, 2-year bond if the coupon is paid semi-annually and the six-month discount rate is 3 percent. Calculate your actual return if you hold this bond for one year and the discount rate does not change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).

Reference no: EM132069694

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