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Assume you are evaluating whether to purchase the following $1,000 face value bonds:

Co. X bond with a 6% coupon rate that matures in 9 years.

Co. Y bond with an 11% coupon rate that matures in 7 years.

Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid annually.

Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid semi-annually.

Value these bonds assuming a market rate on similar risk bonds is 12% and interest is paid annually.

Assuming both bonds were issued at the same time, why would the Co. Y bond pay a higher coupon rate?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91939514

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