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What is the value of the bond if rates drop immediately

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Reference no: EM132818204

Problem 1: A company has a 10% bond that has a face value of $1000 and matures in 10 years. Assume that coupon payments are made semi-annually. The bonds can be called after 5 years at a premium of 8% over face value. What is the value of the bond if rates drop immediately to 7%?

Group of answer choices

Option 1: $1,142

Option 2: $1,181

Option 3: $1,450

Option 4: $1,332

Option 5: $457

Reference no: EM132818204

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