Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 27, Problem 3PA

Subpart (a)

To determine

Calculating the value of bonds.

Subpart (b)

To determine

Calculating the value of bonds.

Subpart (c)

To determine

To determine: Value of bonds.

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Erin buys a bond that pays no coupon payments for $160. When the bond matures, she receives $200.   Erin earned an interest rate of ____________ percent on this bond.   (Enter your answer "as a percent, but without the percentage sign." If you think Erin earned 99.99 percent interest, enter only 99.99 in the blank.)
2
Consider a bond with a three-year remaining maturity. A. If somehow the face value of the coupon is $10,000 and the annual payment is $500. If the yield to maturity is 6%, what would the price of this bond be? b. Considering your response to question (a), is the coupon rate higher, lower, or the same as the yield to maturity? Why?
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