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Determining the expected rate of return

Problem: The XYZ's seven-year $1,000 par bonds pay 9 percent interest. Your required rate of return is 7%. The current market value for the bond is $1,100.

1) Determine the expected rate of return

2) What is the value of the bonds to you given your required rate of return?

3) Should you purchase the bond at the current market price?

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Finance Basics: Determining the expected rate of return

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