Estimating bond's fair price
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Assume that you wish to purchase a 10-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $50. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
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Solution Summary
Solution explains the formula and methodology to estimate fair price of a coupon paying bond.
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Maturity Value=M=$1000
Interest Payments=C=$50 per period (semiannual)
Number ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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