Question
Consider two bonds, X and Y. Each pays a coupon rate of interest of 8% semi-annually. Bond X will mature in 3 years while Bond
Consider two bonds, X and Y. Each pays a coupon rate of interest of 8% semi-annually. Bond X will mature in 3 years while Bond Y will mature in 2 years. If the yields to maturity on the two bonds change from 8% to 7.5%, ________.
Group of answer choicesboth bonds will decrease in value but Bond X will decrease more than Bond Y. both bonds will increase in value but Bond Y will increase more than Bond X. both bonds will decrease in value, but it is impossible to state which bond will decrease more. both bonds will increase in value but Bond X will increase more than Bond Y. both bonds will decrease in value but Bond Y will decrease more than Bond X.
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