Congratulations, you have been hired as an analyst at the Procter and Gamble Co. (PG). It is November 1, 2020. PG just made a coupon payment (semi-annual) on its "8% 2047" bonds that mature on November 1, 2047. The bonds currently sell for 106 with a par value of 100

Explain the difference in the YTM for the 2047 PG and KMB bonds. Which bond provides the more accurate estimate of the rate required in the marketplace for PG at this time? (Hint: the bonds are of similar risk and should have a similar rate; however, they do not. Why is that?)

f. KMB has just issued a 5-year semi-annual bond with a 6% coupon, a par value of 100 and a 5% YTM. Which KMB bond (5 year or 27 year) has the higher price risk and which one has the higher re-investment rate risk? either 5 Year or 27 Year below.

Higher Price Risk 5 Year 27 Year 1 Higher Re-investment Rate Risk 5 Year 27 Year