Question: Question 66 (5 points) (5 points- Chapter-3 ) Bora purchases a 30 year annual coupon bond in the primary market for $1,000. The bond has

Question 66 (5 points)

(5 points- Chapter-3) Bora purchases a 30 year annual coupon bond in the primary market for $1,000. The bond has a yield to maturity that reflects a risk free rate of 4% and a risk premium of 6%. Immediately before his 4^th coupon payment, Bora decides to sell the bond. At the time of sale, the economy is in a recession. The risk free rate has fallen to 2% and the risk premium has fallen to 1%.

b) What would the selling price be if it was a 20 year bond instead of a 30 year bond?

(To have a full mark in this question, you NEED to show your work in detail (all the STEPS of your CALCULATION). Please provide your solution.

a)	Around $2,751

b)	Around $1,979

c)	Around $2,251

d)	Around $1,551

e)	None of the answers are correct

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