Ch1: Introduction to OTCnet

The probability distributions of the future actual cash payments (not promised payments) determine what investors are now (time 0) willing to pay for the bond. Let the RADR for the time 1 expected payment be 8%, and let the RADR for the time 2 expected payment be 10%. Therefore, the value of the bond is V = $950, which is calculated as follows. ................
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