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2 (Bond valuation) National Steel 20 year, $1,000 par
value bonds pay 9 percent interest annually. The market price of the bonds is
$800, and your required rate of return is 13 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 purchase the bond?
