B C D E F G H 1 Chapter 7 Bond Valuation: Consider the following two bonds. 2 Bond A Bond B 3 Coupon rate 4% 4% Q #1: Construct the cash flow table for each bond. 4 Maturity 10 15 5 Face value 1,000 1,000 Q #2: Assume the market interest rate is 3%. 6 What is the price of each bond? 7 Year Bond A Bond B 8 1 Price of Bond A 9 2 Price of Bond B 10 3 11 4 Q #3: Which bond is more sensitive to changes in market 12 5 interest rate? 13 6 14 7 15 16 9 17 10 18 11 19 12 20 13 21 14 22 15 23