An investor has two bonds in his protfolio htathave a face value of 1000 and pay a 10% annual coupon. Bond Lmatures in 15 years, Bond S in 1 year.

a) what will the vaule of eah bond be if the going interestrate is 5%,8% 12%? Assume that only one more interest paymentis to be made on Bond S at its maturity and that 15 more paymentsre to be made on bond L

b) why does the longer term bond's price vary more than theprice of the shorter term bond when interest rates change?