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2. BB Company has two different bonds currently outstanding. Bond coupon has a face value of $1000, 3 years to maturity. Bond and the bond
2. BB Company has two different bonds currently outstanding. Bond coupon has a face value of $1000, 3 years to maturity. Bond and the bond pays S60 each year. Currently, the market prices of bond A and bond B are S respectively Required A with a 8% coupon rate and annual B has a face value of $800 but mature in 5 years, 1020 and $ 860, 1) If the return rate on similar risk bonds is 6%, which bond is worth to be invested? Why?(10 marks) 2) In the future, if the interest rate is expected to drop, which one has more interest rate ri sk? Why?(10 marks) (20 marks)
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