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The Morgan Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $800 every six months over the subsequent eight years, and finally pays $1,000 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The annual required return on both these bonds is 8 percent. What is the current price of Bond M? Of Bond N? Assume the compounding period is six months.
Throughout our course, all bonds are assumed to have face value of $1,000, unless otherwise specified.
Dec 01 2019 View more View Less
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