Question: Interest rates are at 10% for every maturity. Consider a bond with face value $500, a coupon rate of 20% and a maturity equal to

Interest rates are at 10% for every maturity. Consider a bond with face value $500, a coupon rate of 20% and a maturity equal to 2 years.

1. Price the bond if the coupon is paid annually.

2. Price the bond if the coupon is paid semiannually.

3. Compare your answers in (1) and (2). Is there a difference and why?

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