Call Bond A a US Treasury 30-year bond that was issued with a 10% coupon on Dec 31, 1980. On Dec 31, 2000 this is now a 10-year maturity bond. Suppose prevailing interest rates are 4%.

a. What is the fair market price for Bond A?

b. The US Treasury issued Bond B, a new 10-year bond on December 31, 2000 with a 4% coupon. What is the fair market price of this bond? (should equal to face value?)

c. As an investor, which bond would you prefer to purchase?