Consider a bond that promises to pay $100 in one year. a. What is the interest rate
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Question:
Consider a bond that promises to pay $100 in one year.
a. What is the interest rate on the bond if its price today is
$75? $85? $95?
b. What is the relation between the price of the bond and
the interest rate?
c. If the interest rate is 8%, what is the price of the bond
today?
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