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Problem:

John owns a corporate bond with a coupon rate of 8% that matures in 10 years. Bill owns a corporate bond with a coupon rate of 12% that matures in 25 years. If interest rates go up, then:

The value of John's bond will increase and the value of Bill's bond will decrease.
The value of Bill's bond will increase more than the value of John's bond due to the longer time to maturity.
The value of both bonds will remain the same because they were both purchased in an earlier time period before the interest rate changed.

Note: Please provide reasons to support your answer.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147887

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