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1. In 1998 Fischer Corp. issued bonds with an 8 percent coupon rate and a $1,000 face value. The bonds mature on March 1, 2023. If an investor purchased one of these bonds on March 1, 2008, determine the yield to maturity if the investor paid $1,050 for the bond.

a. 8.5%

b. The yield to maturity must be greater than 8% because the price paid for the bond exceeds the face value.

c. The yield to maturity is $950 ($1,000 interest less $50 capital loss).

d. 7.44%

2. A bond's yield to maturity depends upon all of the following except:

a. the maturity of the bond

b. the coupon rate

c. the individual investor's required return

d. the bond's risk as reflected by the bond rating

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