Mr. Jim works for a mutual fund which has a part of its holdings invested...
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Mr. Jim works for a mutual fund which has a part of its holdings invested in bonds. While looking for investment opportunities, Mr. Jim finds a bond which has 25 years to maturity, 13% annual coupon, $1,000 face value and a required return of 11%. Suppose he wants to buy this bond and hold it for 10 years. He expects that in 10 years, the rate of return on a 15-year bond with similar risk will be 8.3%. What is the present value of the bond (for the first 10 years use 25-year rate and for remaining use 15-year rate)?
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