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Fall 2005 EA1 question #2

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  • Fall 2005 EA1 question #2

    Even with textbooks in front of me i can't figure out # 2 from the fall 2005 exam. Here's the question:

    Data for Question 2 (5 points)
    Terms of a serial bond:
    Face amount of bond: $100,000.
    Terms of redemption: 10 equal annual installments at 125% of par
    commencing at end of 10th year after purchase;
    except that the 4th redemption is at 100% of par.
    Coupons: 6%, payable semi-annually.
    Yield rate: 5%, compounded annually.
    Question 2
    In what range is the purchase price?
    (A) Less than $121,850
    (B) $121,850 but less than $121,950
    (C) $121,950 but less than $122,050
    (D) $122,050 but less than $122,150
    (E) $122,150 or more
    Basically, i don't understand the terms of redemption. Any help would be greatly appreciated! thanks!
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