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Company A has an issue of 15-year, 4% coupon bonds with a $1,000 face value. Another firm, Company B, that is viewed as similar in

Company A has an issue of 15-year, 4% coupon bonds with a $1,000 face value. Another firm, Company B, that is viewed as similar in risk as Company A, offers 10-year, 4% 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.

a. A; $78.82

b. B; $80.67

c. A; $77.34

d. A; $79.15

e. B; $79.73

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