Imagine that the market yield to maturity for three-year


Imagine that the market yield to maturity for three-year bonds in a particular risk class is 11 per cent. You buy a bond in that risk class which offers an annual coupon of 9 per cent for the next three years, with the first payment in one year. The bond will be redeemed at par (£100) in three years. How much would you pay for the bond?

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Financial Management: Imagine that the market yield to maturity for three-year
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