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Suppose that you invested $8,000 in a corporate bond 12 years ago and have been receiving annual payments of $700 on the bond

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Answer #1

Minimum price = Present value of all Future interest + Present value of initial investment

= 700 x P/A(9%, 3) + 8,000 x P/F(9%, 3)

= 700 x 2.5313** + 8,000 x 0.772183**

= 1,771.91 + 6,177.46

= 7,949

**From P/A and P/F factor tables

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