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(Bond valuation relationships)A bond of Telink Corporation pays
$110
in annual interest, with a
$1,000
par value. The bonds mature in
25
years. The market's required yield to maturity on a comparable-risk bond is
9
percent.
a.Calculate the value of the bond.
b.How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to
14
percent or (ii) decreases to
5
percent?
c.Interpret your findings in parts a and
b.
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