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There are two bonds that have identical 7% coupons, make semi-annual payments and are priced at par. Bond A has 4 years to maturity; Bond B has 20 years to maturity.

What are interest rates today? 7%

If interest rates increase by 2%, what will be the new price of the two bonds? What is the percentage change in the prices?

A=934.04, -6.6% change

B=815.98, -18.4% change

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92870469

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