solution

Consider a bond which pays 7% and has 8 years to maturity. The market requires an interest rate of 8% on bonds of this risk. What is this bond’s fair price at time 0? Note: ??? = ???? ?????????? ? ? + ? ?????? (A) $942.50 (B) $911.52 (C) $941.74 (D) $942.53 (E) $947.94 10. In the above, what is the bond price after one year (at time 1), assuming the interest rate of 8% does not change? (A) $942.50 (B) $911.52 (C) $941.74 (D) $942.53 (E) $947.94 11. What is the holding period return of this bond over the period from time 0 to time 1? (A) 0.0057 (B) 0.07 (C) 0.08 (D) 0.07955 (E) 0.07427