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    Bond price

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    Suppose a $1,000 par-value bond was issued last year with a promised annual rate of return (yield) of 6 percent when market interest rates on comparable securities were also 6 percent. Thus, the bond pays its holder $60 annually in interest. Today, one year later, market interest rates on comparable securities are 10 percent. The price of the 6 percent bond will approach what dollar figure?

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    Solution Summary

    Bond price is determined.