Problem 2 Consider a $1000 bond with a coupon rate of 7 5 and annual coupons The par value is $1,000, and the bond has 10 years to maturity The yield to maturity is 10 For each question, show your work calculations What is the present value of coupons What is the present value of face value (i e par value) What is the value of the bond Is it a premium or discount bond Value of bond par value, premium bond

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Question: Problem 2: Consider a $1000 bond with a coupon rate of 7.5% and annual coupons. The par value is $1,000, and the bond has 10

Problem 2: Consider a $1000 bond with a coupon rate of 7.5% and annual coupons. The par value is $1,000, and the bond has 10 years to maturity. The yield to maturity is 10%. For each question, show your work/calculations.

What is the present value of coupons?
What is the present value of face value (i.e. par value)?
What is the value of the bond?
Is it a premium or discount bond? Value of bond > par value, premium bond

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