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    Bond Valuation

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    Suppose that 5-year government bonds are selling on a yield of 4 percent. Value a 5-year bond with a 6 percent coupon. Start by assuming that the bond makes annual coupon payments. Then rework your answer assuming that the same bond pays semiannual coupons and the yield refers to a semiannually compounded rate.

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    Solution Summary

    This solution calculates the value of the same bond with annual payments and then with semiannual payments.

    $2.49

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