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Bond X is noncallable and has 20 years to maturity, a 7% annual coupon, and a...

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Finance

Bond X is noncallable and has 20 years to maturity, a 7% annualcoupon, and a $1,000 par value. Your required return on Bond X is10%; and if you buy it, you plan to hold it for 5 years. You (andthe market) have expectations that in 5, years the yield tomaturity on a 15-year bond with similar risk will be 7%. How muchshould you be willing to pay for Bond X today? (Hint: You will needto know how much the bond will be worth at the end of 5 years.)Round your answer to the nearest cent.

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3.6 Ratings (266 Votes)
Calcultion of sale price BOND coupon rate 700 or 007 Face value 1000 Coupon amount 10007 70 YTM on sale i 700 or    See Answer
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