| December 8, 2015

CAT issues some new 1,000 par value subordinated debentures with an annual coupon rate of 8%, payable semi-annually. The bonds mature in 30 yrs. The bond does not contain a call feature. The market interest rate on similar risk and maturity bonds is 9%, compounded semi-annually.
A)You buy the bond. What would you pay if ten yrs later the market interest rate on 20 yr bonds is 7%, compounded semi annually. You sell the bond how much would you receive?

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