Question
Dominion Groceries Inc. has a 9-year, 6% annual coupon bond outstanding with a $1,000 par value. Fresh Produce Inc. has a 10-year, 4% annual coupon
Dominion Groceries Inc. has a 9-year, 6% annual coupon bond outstanding with a $1,000 par value. Fresh Produce Inc. has a 10-year, 4% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 5.5%. Which of the following statements is correct if the market yield increases to 5.75%?
a.
The Dominion bond will decrease in value by $16.98.
b.
The Fresh bond will increase in value by 1.95%.
c.
The Fresh bond will increase in value by $17.28.
d.
Both bonds would increase in value by1.70%.
e.
The Dominion bond will decrease in value by 1.70%.
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