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Company A has an issue of 10-year, 4% annual coupon bonds with a $1,000 face value. Another firm, Company B, that is viewed as similar
Company A has an issue of 10-year, 4% annual coupon bonds with a $1,000 face value. Another firm, Company B, that is viewed as similar in risk as Company A, offers 15-year, 4% annual coupon bonds with a $1,000 face value. The current market yield is 4% and both issues pay interest at year end. If market interest rates decrease by 2% (e.g. 200 basis points), which of the following statements is correct? Company bonds will rise by $ more than that of the other issue. Select one: a. A; $78.82 b. A; $79.15 C. A; $80.67 d. B; $77.34 O e. B; $79.73
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