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Chris98 Chris98
wrote...
6 years ago
Suppose 3 years ago, you paid $950 for a bond that has a par value of $1,000. The bond interest
is paid annually and annual coupon rate is 4.5%. If you want to have 5% yield on your
investment, what should be your selling price today?

a 854.34 b 878.31 c 1,135.00 d 921.45 e 957.93
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wrote...
Staff Member
6 years ago
e 957.93

Explanation:

The annual interest payment is $1000×0.045=$45.00.
Solving equation 950=45(P/A,5%,3)+X(P/F,5%,3) for X, we get X=$957.93.
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