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Suppose that you purchased a B- rated $5,000 annual coupon bond with an 16.5% coupon rate...

Suppose that you purchased a B- rated $5,000 annual coupon bond with an 16.5% coupon rate and a 9-year maturity. The current rate on 9-year US treasuries is 3%. If you purchased it at a 7.021% discount to par value, how much did you pay?

Solutions

Expert Solution

Par value = $5000
Discount on par value = $5000*7.021%
=$351.05
Purchase price = $5000-351.05
=$4648.95
Correct Answer =$4648.95

jeff jeffy answered 2 years ago
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