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The following bonds have a par value of $1,000 and the required rate of return is 10%.
Bond XY: 5¼ percent coupon, with interest paid annually for 20 years
Bond AB: 14 percent coupon, with interest paid annually for 20 years
What is each bond's current market price?
Bond XY Bond AB
If current interest rates are 9%, which bond would you expect to be called? Explain.