How much should you be willing to pay for corporate bond

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Reference no: EM132004257

Question: a. How much should you be willing to pay for a $50, 000 Corporate Bond that was issued in 2000 and will mature in 2025 (end-of-year)? The bond pays semi-annual interest at a 4% nominal rate (compounded semi-annually), and your MARR is 6% (effective annual rate). Assume that we are at the beginning of the current year, 2017.

(b) What would your answer be if you knew that the Corporate Bond in part (a) was going to be "called in" at the end of 2020? Would you purchase it, why or why not?

Reference no: EM132004257

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