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The University of California has two bonds outstanding. Both issues have the same credit rating,...

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Finance

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 3%. 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 12%.

Part 1

What is the price of bond A?

Part 2

What is the price of bond B?

Part 3

Now assume that yields increase to 15%. What is the price of bond A?

Part 4

What is the price of bond B now?

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