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    Bond Valuation and Yield to maturity

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    What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return?
    a. 5 percent
    b. 7 percent
    c. 12 percent

    (Note: At maturity, the bond will be retired and the holder will receive $1,000 in cash. Bonds are typically issued with $1,000 face, or par, values. The actual market value at any point in time will tend to rise as interest rates fall and fall as interest rates rise.)

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    Solution Summary

    Calculation of bond valuation and yield to maturity are examined.