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Bond X is noncallable and has 20 years to maturity, an 8% annual coupon, and a $1,000 par value. Your required
Bond X is noncallable and has 20 years to maturity, an 8% annual coupon, and a $1,000 par value. Your required
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return on Bond X is 9%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 7.5%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years).
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