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problem: Suppose that McDonald's and Burger King have similar 1,000 dollar par value bond issues outstanding. The bonds are equally risky. The Burger King bond has an annual coupon rate of 8% and matures twenty years from today. The McDonald's bond has a coupon rate of 8%, with interest paid semiannually, & it also matures in 20 years. If the nominal required rate of return, kd is 12%, semiannual basis, for both bonds, determine the difference in current market prices of the two bonds?

Basic Finance, Finance

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