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Question: (Bond valuation) You are examining three bonds with a par value of $1,000 (you receive $1,000 at maturity) and are concerned with what would happen to their market value if interest rates (or the market discount rate) changed. The three bonds are

Bond A-a bond with 3 years left to maturity that has a 6 percent annual coupon interest rate, but the interest is paid semiannually.

Bond B-a bond with 7 years left to maturity that has a 6 percent annual coupon interest rate, but the interest is paid semiannually.

Bond C-a bond with 20 years left to maturity that has a 6 percent annual coupon interest rate, but the interest is paid semiannually. What would be the value of these bonds if the market discount rate were

a. 6 percent per year compounded semiannually?

b. 3 percent per year compounded semiannually?

c. 9 percent per year compounded semiannually?

d. What observations can you make about these results?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92297054

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