(15%) Your firm has narrowed down its investment selection to two bonds. One is a seasoned issue of Kraft Heinz (KHC), which originally was a 25-year bond with a 6% coupon rate that was issued 20 years ago. The other is a newly issued 25-year bond of General Mills (GIS) that carries a coupon rate of 6%. Both bonds have a face value of $1,000. Assume KHC and GIS carry the same debt rating.

(9 pts) What is the price of each bond today?

(6 pts) Your firm strongly believes that interest rates are set to rise significantly in the near-term. Your boss tells you to assume interest rates will rise to 10% in your analysis. Which bond would you recommend for investment given your firms outlook for interest rates and why?