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  3. a) you are considering two bonds. bond a has a 6%

a) You are considering two bonds. Bond A has a 6% annual coupon while Bond...

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Accounting

a) You are considering two bonds. Bond A has a 6% annual coupon while Bond B has a 5% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT?

a.

The price of Bond A will decrease over time, but the price of Bond B will increase over time.
b.

The prices of both bonds will decrease over time, but the price of Bond A will increase at a faster rate.
c.

The prices of both bonds will change.
d.

The price of Bond B will decrease over time, but the price of Bond A will increase over time.
e.

The prices of both bonds will increase over time, but the price of Bond A will increase at a faster rate.

b) Lauren Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon interest payment of $65. The market requires an interest rate of 6.1% on these bonds. What is the bond's price?

a.

$1,136.21
b.

$1,029.30
c.

$1,386.53
d.

$1,236.43
e.

$1,259.94

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