Carl buys a 7-year, $10,000 par value, 7% coupon bond. Exactly 4 years after purchasing the bond, he needs cash so he wants to sell the bond. If due to changes in the interest rate environment, the same bond would today only have a 6% coupon, what would be the fair price of the bond?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter12: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 10FPE
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  1. Carl buys a 7-year, $10,000 par value, 7% coupon bond. Exactly 4 years after purchasing the bond, he needs cash so he wants to sell the bond. If due to changes in the interest rate environment, the same bond would today only have a 6% coupon, what would be the fair price of the bond?
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