Question: a. How do you determine the value of a bond? (ii) What is the value of a ten-year, $1,000 par value bond with a 10

a. How do you determine the value of a bond?

(ii) What is the value of a ten-year, $1,000 par value bond with a 10 percent annual coupon
if its required rate of return is 10 percent? What would be the value of the 10-year bond
described above, just after it had been issued, the expected inflation rate rose by 3
percentage points, causing investors to require a 13 percent return? Is the security now
a discount bond or a premium bond?

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