Question
Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each has the same time-to-maturity. Bond A pays
Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each has the same time-to-maturity. Bond A pays higher coupons than Bond B. If the yields to maturity on the two bonds change from 10% to 13%,
A. | both bonds will increase in value, but bond A will increase more than bond B. | |
B. | both bonds will increase in value, but bond B will increase more than bond A. | |
C. | both bonds will decrease in value, but bond A will decrease more than bond B. | |
D. | both bonds will decrease in value, but bond B will decrease more than bond A. | |
E. | None of the options are correct. |
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