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7. You have an opportunity to buy a $1,000 bond that matures in 10 years. The bond pays 6% annual interest, and interest is payable every six months. The current market interest rate for similar bonds is 8%. What is the most you would be willing to pay for this bond?

8. Mr. Sullivan is borrowing $2,000,000 to expand his business. The loan will be for ten years at 12% annual interest and will be repaid in equal quarterly installments. How much will each quarterly payment be?

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This solution provides a detailed, step by step explanation of the given economics question.

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Face value of Bond $1,000
Time to maturity 10 years
Coupon rate 6% Annual
Market interest rate 8%
Current value ...

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