Intro

The University of California has two bonds outstanding. Both

issues have the same credit rating, a face value of $$1,000$ and

a coupon rate of $4\%.$ Coupons are paid twice a year. Bond $A$

matures in $1$ year, while bond $B$ matures in $30$ years.

The market interest rate for similar bonds is $11\%.$

Part $1$

What is the price of bond $A?$

Part $2$

$$

What is the price of bond $B?$

Part $3$

Attempt $\frac{1}{10}$ for $10$ pts$.$

Now assume that yields increase to $14\%.$ What is the price of

bond $A?$

Part $4$

What is the price of bond B now?