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You buy a 5-year bond with a coupon rate of 6% for $1000 (annual coupons paid). One year later, you sell the bond. At that time, the yield curve (based on zero coupon bonds) is as follows:
T 1 2 3 4 5
rt (%) 5.50 6.50 7.25 7.75 8.00
a. What is the price of the bond in one year?
b. What is the capital gain/loss on the sale of the bond?
c. What is your return on this investment?
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You own a 5-year bond with a face value of $1,000 and a coupon rate of 10 percent with annual payments. The bond is currently worth $1,216.47. If market interest rates remain unchanged, what will be the value of the bond when there are only 3 years l..
To reduce risk, senior management propose developing the service in three stages. Should the company pursue this project based on the expected NPV?
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