Consider two 30-year bonds with the same purchase price. Each has an annual coupon rate of 5% paid annually and a par value of 1000. The first bond has an annual yield rate of 5%, and a redemption value of 1200. The second bond has an annual yield rate of j, and a redemption value of 800. Calculate j. Use the bond's salesman method.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
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Consider two 30-year bonds with the same purchase price. Each has an annual
coupon rate of 5% paid annually and a par value of 1000. The first bond has an annual
yield rate of 5%, and a redemption value of 1200. The second bond has an annual yield
rate of j, and a redemption value of 800. Calculate j. Use the bond's salesman method.
Transcribed Image Text:Consider two 30-year bonds with the same purchase price. Each has an annual coupon rate of 5% paid annually and a par value of 1000. The first bond has an annual yield rate of 5%, and a redemption value of 1200. The second bond has an annual yield rate of j, and a redemption value of 800. Calculate j. Use the bond's salesman method.
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