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    Value of bonds

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    Two bonds outstanding, both pay $100 annual interest plus $1000 at maturity. Bond 1 has a maturity of 15 years, bond 2, (1) year. What is the value of each of these bonds at the going interest rate of:

    1. 5%
    2. 8 %
    3. 12 %

    Assume there is only one more interest payment to be made on bond 2.

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    Solution Summary

    The solution calculates the value of two bonds at different interest rates.