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What is the most should pay for the bond to guarantee

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Reference no: EM132761484

Problem 1: Rania is looking at buying a 10 no call 7 bond. It has a face value of $5,000, a coupon of 7.75%. It is callable only on coupon dates. The call price is $5,700 in year 7 (either at year 7 or at year 7.5). It drops to $5,400 in year 8, and $5,200 in year 9. The bond matures at face value. Rania has a target yield of 3%. What is the most she should pay for the bond to guarantee her target yield?

Reference no: EM132761484

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