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A $1000 par value 4% bond with semiannual coupons matures at the end of 10 years....

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Basic Math

A $1000 par value 4% bond with semiannual coupons matures at theend of 10 years. The bond is callable at $1050 at the ends of years4 through 6, at $1025 at the ends of years 7 through 9, and at$1000 at the end of year 10. Find the maximum price that aninvestor can pay and still be certain of a yield rate of 5%convertible semiannually.

ANSWER: 922.05

Answer & Explanation Solved by verified expert
3.9 Ratings (634 Votes)
In this question the redemption values are not same at all possible redemption dates However the modified coupon rates for each possible redemption period ie year 4 year 6 year 7year 9    See Answer
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