From 2006 Past Final Exam

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Department
Economics for Management Studies
Course
MGEA06H3
Professor
Iris Au
Semester
Winter

Description
From 2006 Past Exam 29. A bond which matures in three years has a face value of $1000, and a coupon interest rate (printed on the bond) of 7% (this means that the bond will pay $70 in one year, another $70 in two years, and in three years will pay another $70 and return the face value of $1000). If the current interest rate in the economy is 5%, then you would expect this bond to sell today for (to the nearest penny): A) $1000 B) $1060 C) $1054.46 D) $1065.54 E) $940 F) $947.51 G) $932.49 H) $960 I) $1040 J) $1060.40 K) $1059.60 L) $1120 M) none of the above 30. A bond which matures in two years has a face value of $1000, and a coupon interest rate (printed on the bond) of 10% (this means that the bond will pay $100 in one year, and in two years will pay another $100 and return the face value of $100If the bond is currently selling for $1044.89, what is the current interest rate that makes this bond just worth buying (to the nearest one decimal point)
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