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A 2 0 - year bond has a coupon rate of 1 5 percent, and another bond of the same maturity has a coupon rate

20 -

year bond has a coupon rate of

15

percent, and another bond of the same maturity has a coupon rate of

10

percent. If the bonds are alike in all other respects, which will have the greater relative market price decline if interest rates increase sharply? Why?

Why are dividends the basis for the valuation of common stock?

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