a. The bond's price is computed as shown below:
Annual coupon payments will be as follows:
= $ 1,000 x 10%
= $ 100
So, the price of the bond will be:
= $ 100 / 1.0361 + $ 100 / 1.0362 + $ 100 / 1.0363 + $ 100 / 1.0364 + $ 100 / 1.0365 + $ 1,000 / 1.0365
= $ 1,288.15 Approximately
b. The bond's price is computed as shown below:
Annual coupon payments will be as follows:
= $ 1,000 x 10%
= $ 100
So, the price of the bond will be:
= $ 100 / 1.0431 + $ 100 / 1.0432 + $ 100 / 1.0433 + $ 100 / 1.0434 + $ 100 / 1.0435 + $ 1,000 / 1.0435
= $ 1,251.63 Approximately
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