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Assume that a 1-year bond (issued by Apple, Inc.) with a face value of $1,000 is...

Assume that a 1-year bond (issued by Apple, Inc.) with a face value of $1,000 is currently trading at PV = $980.39, and another 2-year bond (also issued by Apple, Inc.)with identical face value is currently trading at $907.03. If a premium for holding 2-yr contracts relative to holding 1-yr contracts averages 2.5 percentage points, then according to Term (Liquidity)PremiumTheory–the next year re-issued1-year Apple’s bond should go for sale at the price _________in the primary market.A).943.71B).925.93C).970.87D).930.23E).865.33

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The correct option is C.) 970.87

Assume that a 1-year bond (issued by Apple, Inc.) with a face value of $1,000 is currently trading at PV = $980.39, and another 2-year bond (also issued by Apple, Inc.)with identical face value is currently trading at $907.03. If a premium for holding 2-yr contracts relative to holding 1-yr contracts averages 2.5 percentage points, then according to Term (Liquidity)PremiumTheory–the next year re-issued1-year Apple’s bond should go for sale at the price .C.) 970.87 in the primary market.

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