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Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually....

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Finance

Consider a $1,000 par value bond with a 7% annual coupon. Thebond pays interest annually. There are 20 years remaining untilmaturity. You have expectations that in 5 years the YTM on a15-year bond with similar risk will be 7.5%. You plan to purchasethe bond now and hold it for 5 years. Your required return on thisbond is 10%. How much would you be willing to pay for this bondtoday? Select one:

a. $820

b. $859

c. $875

d. $1042

e. $956

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Transcribed Image Text

Consider a $1,000 par value bond with a 7% annual coupon. Thebond pays interest annually. There are 20 years remaining untilmaturity. You have expectations that in 5 years the YTM on a15-year bond with similar risk will be 7.5%. You plan to purchasethe bond now and hold it for 5 years. Your required return on thisbond is 10%. How much would you be willing to pay for this bondtoday? Select one:a. $820b. $859c. $875d. $1042e. $956

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