A. You are considering the purchase of a Pure Discount Bond with a Face Value of $10,000,

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Question:

A. You are considering the purchase of a Pure Discount Bond with a Face Value of $10,000, which matures in ninety-four days. If you desire a return of 2.75%, how much would you bid for the bond today?

B. Suppose that you decided to purchase the bond described above for the calculated price. Now assume that immediately after you purchased the bond, the rate rises by 20 Basis Points. What will now be the price of the bond after this rise in rates?