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Your broker is offering you two bonds issued by two U.S. companies. One bond has an AA credit rating and the other has a BB rating from Standard and Poor's. Both bonds have a par value of $ 1.000, a coupon rate of 10%, and a maturity of 10 years. The required rate of return by investors is 8% for AA-rated bonds and 12% for BB-rated bonds. Please answer the following questions.

1. Calculate the price of each bond, assuming coupons are paid annually.

2. Recalculate the price of each bond, assuming coupons are paid semi-annually.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92304190

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