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Question
1 (Bond valuation) you own a 10 year, $1,000 par value
bond paying 7.5 percent interest annually. The market price of the bond is
$950, and your required rate of return is 10 percent.
a. Compute
the bonds expected rate of return.
b. Determine
the value of the bond to you, given your required rate of return.
c. Should
you sell the bond or continue to own it?
