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Consider a bond selling at par ($100) with a coupon rate of 6% and 10 years to maturity.
a) What is the price of this bond if the yield is 15%?
b) What is the price of this bond if the yield increases from 15% to 16%, and by what percentage did the price of this bond change?
c) What is the price of this bond if the yield is 5%?
d) What is the price of this bond if the yield increases from 5% to 6%, and by what percentage did the price of this bond change?
e) From your answers to parts b and d, what can you say about the relative price volatility of a bond in a high-interest-rate environment compared to a low-interest-rate environment?
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Identify and communicate the primary objectives and fundamental principles of financial management and corporate financial decision making
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A European call with a strike price of $50 and a maturity of one year is worth $6.
After transferring the funds back to the United States, what was the investor’s return on her $310,000?
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