18 A large company has two outstanding bonds with the same features, including maturity, except...
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Accounting
18
A large company has two outstanding bonds with the same features, including maturity, except for the coupon rate. Bond A is paying 7.8%, while bond B is paying 8.6%. If the market interest rate increases by 1.5%:
Select one:
a. Both bond A and bond B prices will move by the same amount.
b. Bond B's price will increase more.
c. Bond B will have the greater fall in price.
d. Bond A's price will increase more.
e. Bond A will have the greater fall in price.
18
A large company has two outstanding bonds with the same features, including maturity, except for the coupon rate. Bond A is paying 7.8%, while bond B is paying 8.6%. If the market interest rate increases by 1.5%:
Select one:
a. Both bond A and bond B prices will move by the same amount.
b. Bond B's price will increase more.
c. Bond B will have the greater fall in price.
d. Bond A's price will increase more.
e. Bond A will have the greater fall in price.
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