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Assume a $1000 face value bond has a coupon rate of 8.5%, pays interest annually, and has an 8-year life. i. If investors are willing to accept a 9.25% rate of return on bonds of similar quality, what is the (present) value of this bond and is it selling at a premium or discount? ii. What would be value of this same bond if investors are instead willing to accept an 8.25% rate, and is it selling a premium or discount?
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