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Mathematics, 30.11.2020 18:00 sctenk6052

A 20 year $100 par-value bond with 5% coupon rate with annual coupon payment is bought at a discount price of $80.

a. What is the yield?

b. If I can deposit the coupon payment into a bank account paying 4%

annually, what is my combined yield? That is, what is the annual yield

to go from $80 to the balance of the account plus the $100 redemption.

c. This bond is callable after 15 years (at par) and I could deposit the

redeemed amount in an account paying 4%, what is my annual yield

for this 20-year period.

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Answers: 3

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