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A bond that matures in 12 years has a par value of $1000 and an annual...

A bond that matures in 12 years has a par value of $1000 and an annual coupon rate of 10%. The market interest rate is 8%. What is its price? Is it a premium or discount bond?

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Answer #1

Given,

Maturity (n) = 12 years

Par value = $1000

Coupon rate = 10%

Market interest rate (r) = 8% or 0.08

Solution :-

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