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What would be the price of the bond

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Question 1: You have been considering a zero-coupon bond, which pays no interest but will pay a principle of $1000 at the end of five years. the price of the bond is now $712.99 its required rate of return 7.0%. This morning's new contained a surprising development. The government announced that the rate of inflation appears to be 5.5% instead of the 4% that most people had been expecting.(suppose most people had thought the Real rate of interest rate was 3%) what would be the price of the bond, once the market began to absorb this new information about inflation?

Reference no: EM132503634

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