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    Leggio Corporation

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    Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?

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    7. Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?

    $1,046.59

    $1,111.58

    $1,133.40

    $1,177.78

    $1,189.04

    where B is the issued price/current price
    C is the coupon payment
    r is the current interest rate
    n is the period

    B = 70 x [1 - 1 ] + 1,000
    (1.06)19 (1.06)19
    0.06

    B = ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the new price of the bonds, given that they now have 19 years to maturity.

    $2.19

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