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The University of California has two bonds outstanding. Both issues have the same credit rating, a face value of $1,000 and a coupon rate of 4%. Coupons are paid twice a year. Bond A matures in 1 year, while bond B matures in 30 years.

The market interest rate for similar bonds is 9%.

1. What is the price of bond A?

2. What is the price of bond B?

3. Now assume that yields increase to 12%. What is the price of bond A?

4. What is now the price of bond B?

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Financial Management, Finance

Category:- Financial Management
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