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An investor is considering the purchase of the bond with the face value of 21000 with thecoupon rate of 12% and maturity period of 5 years. If the investor wants a yield of 14°9,What is the maximum price he should be ready to pay for this bond'? If the bond is sellingfor 2990 What would be his yield? |
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Answer» Answer: A bond's COUPON rate denotes the amount of annual interest PAID by the bond's issuer to the bondholder. Set when a bond is issued, coupon interest rates are determined as a percentage of the bond's par VALUE, also known as the "face value." A $1,000 bond has a face value of $1,000. If its coupon rate is 1%, that MEANS it pays $10 (1% of $1,000) a year. Explanation: I hope it helps you |
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