4. Consider two bonds with 10% coupon rates and $1,000 face values . One of the bonds...

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4. Consider two bonds with 10% coupon rates and $1,000 face values . One of the bonds has a term-to-maturity of four years; the other has a term-to-maturity of 15 years. Both make annual interest payments. Assuming that yields on the two bonds rise from 10% to 14%, calculate the intrinsic values of the two bonds before and after the change in interest rates. Explain the difference in percentage price changes.

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Investments

ISBN: 9788120321014

6th Edition

Authors: William F. Sharpe, Gordon J. Alexander, Jeffery V. Bailey

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