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A bank has an outstanding bond issue with a face value of $ 1000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by a pension fund that wishes to sell them to another party. It estimates that, in the current market conditions, the bonds should provide nominal return of 14%. Calculate the price of the bond that should be realized on the sale?

A bank has an outstanding bond issue with a face value of $ 1000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by a pension fund that wishes to sell them to another party. It estimates that, in the current market conditions, the bonds should provide nominal return of 14%. Calculate the price of the bond that should be realized on the sale?

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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A bank has an outstanding bond issue with a face value of $ 1000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by a pension fund that wishes to sell them to another party. It estimates that, in the current market conditions, the bonds should provide nominal return of 14%. Calculate the price of the bond that should be realized on the sale?
Transcribed Image Text:A bank has an outstanding bond issue with a face value of $ 1000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by a pension fund that wishes to sell them to another party. It estimates that, in the current market conditions, the bonds should provide nominal return of 14%. Calculate the price of the bond that should be realized on the sale?
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