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Question:
Bonds A and B are identical, including the risk class. The only difference between A and B is as shown below.
Bond A
FV: 1000
Semi annual Coupon Value: $120
Years to maturity: 15
Price: $919.43
I had calculated that the YTM % is 13.25% for Bond A
Bond B
FV: 1000
Annual Coupon Value: $130
Years to maturity: 15
Price: ??
I used 13.25% as my YTM for Bond B, and came up with a price of $983.89. The correct answer is actually $957.02 and I can’t figure out how to get to that answer. I don’t have a finance calculator, so could someone explain to me the steps to arrive at the right answer?
Thanks!
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