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Absalom Energy's 11% coupon rate, semiannual payment, $1,000 par value bonds that mature in 20 years are callable 8 years from now at a price of $1,050. The bonds sell at a price of $1,299.90, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds issued in 8 years? Do not round intermediate calculations. Round your answer to two decimal places

Absalom Energy's 11% coupon rate, semiannual payment, $1,000 par value bonds that mature in 20 years are callable 8 years from now at a price of $1,050. The bonds sell at a price of $1,299.90, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds issued in 8 years? Do not round intermediate calculations. Round your answer to two decimal places

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Subject:- finance 

Absalom Energy's 11% coupon rate, semiannual payment, $1,000 par value bonds that mature in 20 years are callable 8 years from now at a price of $1,050. The bonds sell at a price of $1,299.90, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds issued in 8 years? Do not round intermediate calculations. Round your answer to two decimal places
Transcribed Image Text:Absalom Energy's 11% coupon rate, semiannual payment, $1,000 par value bonds that mature in 20 years are callable 8 years from now at a price of $1,050. The bonds sell at a price of $1,299.90, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds issued in 8 years? Do not round intermediate calculations. Round your answer to two decimal places
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