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, 5% 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%?

Select one:

a. Both bonds would decrease in value by 2.50%.

b. The Dominion bond will decrease in value by 1.89%.

c. The Fresh bond will increase in value by $18.17.

d. The Dominion bond will decrease in value by $17.57.

e. The Fresh bond will increase in value by 1.70%.

Does anyone know how to solve this? (ANS: D)