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You want to buy a corporate bond that is being issued today by ACME Corp

You want to buy a corporate bond that is being issued today by ACME Corp. The terms of the bond are shown below:

a. Maturity:                                               15 years

b. CouponRate:                                      5.5 percent

c. FaceValue                                             $1,000

d. Interest PaymentSchedule:       Semi-annual

  1. Please calculate the price you would pay for this bondif your required return is 8 percent. (10points)
  2. b. What would you be willing to pay for this bond ifinflation was expected to increase by 4 percent and your requiredreturn jumped up to 12 percent? (10 points)

Apr 17 2018 View more View Less

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