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Indifferent between bond and another bond

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Suppose that John can buy a savings bond for $900 that matures in 3 years and pays John $1,000 with certainty. He is indifferent between this bond and another bond which is riskier but which pays 3% higher interest rate. How much, the riskier bond costs today if it pays $1,000 in 7 years.

  • $641
  • $784
  • $921
  • None of the above

Reference no: EM131357581

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