Question
Consider two bonds, Echo and Charlie. Both bonds presently are selling at their par value of $1,000. Each matures eight years from now. Bond Echo
Consider two bonds, Echo and Charlie. Both bonds presently are selling at their par value of $1,000. Each matures eight years from now. Bond Echo pays interest of $140 annually, while Bond Charlie pays interest of $160 annually. If both bonds see their yields to maturity rise by 2.0%, then both bonds:
a. will decrease in value, but Bond Charlie will decrease more than Bond Echo. b. will increase in value, but Bond Echo will increase more than Bond Charlie. c. will decrease in value, but Bond Echo will decrease more than Bond Charlie. d. will increase in value, but Bond Charlie will increase more than Bond Echo. e. None of the above options are correct.
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