A 1000 bond has a coupon rate of 10 percent and matures, Ask an Expert

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A $1000 bond has a coupon rate of 10 percent and matures after eight years. Interest rates are currently 7 percent.
a) What will the price of this bond be if the interest is paid annually?
b) What will the price be if investors expect that the bond will be called with no call penalty after two years?
c) What will the price be if investors expect that the bond will be called after two years and there will be a call penalty of one year's interest?
d) Why are the answers different for questions (a), (b), and (c)?

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Basic Finance, Finance

Category:- Basic Finance
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