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Considering the following two bonds: Bond A: 5% Coupon; 5 Year Maturity Bond B: 6% Coupon; 5 Year Maturity The current yield on both bonds
Considering the following two bonds: Bond A: 5% Coupon; 5 Year Maturity Bond B: 6% Coupon; 5 Year Maturity The current yield on both bonds is 3% Explain conceptually (without any calculations) the followings: - Which bond will have higher price and why. - Which bond price change will be greater (and why) if the yield changes to 4%. Also explain what does the yield-to-maturity (YTM) measure? And what are the issue(s) using the YTM as a measure.
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