Would now have a discount or a premium bond

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Robert Black and Carol Alvarez are vice presidents of Western Money Management and codirectors of the company's pension fund management division. A major new client, the California League of Cities, has requested that Western present an investment seminar to the mayors of the represented cities. Black and Alvarez, who will make the presentation, have asked you to help them by answering the following questions.

Question a. How is a bond's value determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required return is 10%?

Question b. What is the value of a 13% coupon bond that is otherwise identical to the bond described in Part a? Would we now have a discount or a premium bond?

Question c. What is the yield to maturity on a 10-year, 9%, annual coupon, $1,000 par value bond that sells for$887.00? that sells for $1,134.20?

Reference no: EM132566400

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