1. Consider two bonds, each with an interest rate (i) of 5%, coupon payments (C) of...

1. Consider two bonds, each with an interest rate (i) of 5%, coupon payments (C) of $20, and face values (F) of $1000. The first bond matures in 20 years and the second bond matures in 10 years.

(a) Find the prices of the two bonds. Next price a console with the same interest rate and coupon payment. Report F × i.

(b) Repeat part (a) when the coupon payment is $100.

(c) Repeat part (a) once again with a coupon payment of $50.

(d) What does this tell you about the price of a console relative to long-run bonds?

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Rahul Sunny answered 2 years ago

1. Consider two bonds, each with an interest rate (i) of 5%, coupon payments (C) of...

1. Consider two bonds, each with an interest rate (i) of 5%, coupon payments (C) of $20, and face values (F) of $1000. The first bond matures in 20 years and the second bond matures in 10 years. (a) Find the prices of the two bonds. Next price a console with the same interest rate and coupon payment. Report F × i. (b) Repeat part (a) when the coupon payment is $100. (c) Repeat part (a) once again with a...

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1. Consider two bonds, each with an interest rate (i) of 5%, coupon payments (C) of...

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