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An nn-year 1,000 par value bond with 8 percent annual coupons has an annual effective yield of ii, i>0i>0. The book value of the bond at the end of year 3 is 1,099.84 and the book value at the end of year 5 is 1,082.27. Calculate the purchase price of the bond.

Respuesta :

Answer:

the  purchase price of the bond is $1,106.125

Explanation:

The computation of the purchase price of the bond is shown below:

But before that we have to find the following amount

= ($1,082.7 - $1,099.84) ÷ ( 5 years - 3 years)

= - 6.285

Now the purchase price of the bond is

= $1,087.27 + (-6.285) × (-3)

= $1,106.125

hence, the  purchase price of the bond is $1,106.125

The same is to be considered

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