Question

Bond x is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1000 par value. your required return on bond x is 10%; and if you buy it, you plan to hold it for 5 years. you ( and the market) have expectations that in 5 years, the yield to maturity on a 15 year bond with similar risk will be 8.5%. how much should you be willing to pay for the bond x today ?

Answer 1

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