5. Consider two bonds with $1,000 face values that carry coupon rates of8%, make annual coupon payments,

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5. Consider two bonds with $1,000 face values that carry coupon rates of8%, make annual coupon payments, and exhibit similar risk characteristics. The first bond has five years to maturity whereas the second has ten years to maturity. The appropriate discount rate for investments of similar risk is 8%. If this discount rate rises by two percentage points, what will be the respective percentage price changes of the two bonds?

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Investments

ISBN: 9788120321014

6th Edition

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

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