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An investor is considering one of the newly issued 10 year AAA corporate bonds shown in the following table: Face Values of both bonds are
An investor is considering one of the newly issued 10 year AAA corporate bonds shown in the following table:
Face Values of both bonds are $100.
A: Suppose that market interest rates decline by 100 basis points (1%). Contrast the effect of this decline on the price of each bond.
B: Should the investor prefer the RST bond over the XYZ bond when rates are expected to rise or to fall?
C: What would be the effect, if any, of an increase in the volatility of interest rates on the prices of each bond?
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