Exercise on bond valuationan investor has two bonds in her, Ask an Expert

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Exercise on Bond Valuation.

An investor has two bonds in her portfolio that have a face value of $1000 and pay a 10% annual coupon. Bond A matures in 15 years, while Bond B matures in 1 year.

What will the value of each bond be if the going interest rate is 5%, 8%, and 12%. ? Assume that only one more interest payment is to be made on Bond B at its maturity, and that 15 more payments are to be made on bond A.

Why does the longer-term bond price vary more than the price of the shorter-term bond when interest rates change?

Please show your work solve problem in detail.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91600718

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