1. A two-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1). If one year later (Year 2) the market interest rate decreases by 5%, then this bond will have a market price of $ ____ (round UP the nearest integer) next year (Year 2). 2. Using the one-period valuation model, assuming a year-end dividend of $11.00, an expected sales price of $110, and a required rate of return of 10%, the current price of the stock would be $ ________. 3. Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then People can use a lower price to buy your bond today. (True or False)
1. A two-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1). If one year later (Year 2) the market interest rate decreases by 5%, then this bond will have a market price of $ ____ (round UP the nearest integer) next year (Year 2).
2. Using the one-period valuation model, assuming a year-end dividend of $11.00, an expected sales price of $110, and a required
3. Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then People can use a lower price to buy your bond today. (True or False)
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