Question
?( Bond relationship ?) ?Mason, Inc. has two bond issues? outstanding, called Series A and Series? B, both paying the same annual interest of ?$110
?(Bond relationship?) ?Mason, Inc. has two bond issues? outstanding, called Series A and Series? B, both paying the same annual interest of
?$110 Series A has a maturity of
12 ?years, whereas Series B has a maturity of 11 year.
a. What would be the value of each of these bonds when the going interest rate is? (1)6 ?percent, (2) 9 percent, and? (3) 13
?percent? Assume that there is only one more interest payment to be made on the Series B bonds.
b. Why does the? longer-term (12?-year) bond fluctuate more when interest rates change than does the? shorter-term ?(11?-year) ?bond?
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