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A bond's credit rating provides a guide to its price. Assume Aaa bonds yield 3.9% and...

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Finance

A bond's credit rating provides a guide to its price. Assume Aaabonds yield 3.9% and Baa bonds yield 4.9%. Assume a 10% five-yearbond with annual coupons and a face value of $1,000. (Donot round intermediate calculations. Round your answers to 2decimal places.)

a. What is the bond's price if it is rated asAaa?

b. What is the bond's price if it is rated asBaa?

Answer & Explanation Solved by verified expert
3.5 Ratings (252 Votes)
Par Value of Bond 1000Annual coupon rate 10Coupon payment 100010 100Maturityn 5 yearsa Aaas    See Answer
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A bond's credit rating provides a guide to its price. Assume Aaabonds yield 3.9% and Baa bonds yield 4.9%. Assume a 10% five-yearbond with annual coupons and a face value of $1,000. (Donot round intermediate calculations. Round your answers to 2decimal places.)a. What is the bond's price if it is rated asAaa?b. What is the bond's price if it is rated asBaa?

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