Question
Lady Products, Inc. just issued 10-year, 8% coupon bonds at par. Outstanding bonds of Limbaugh Corp. Lady's closest competitor, have a maturity of 10 years
Lady Products, Inc. just issued 10-year, 8% coupon bonds at par. Outstanding bonds of Limbaugh Corp. Lady's closest competitor, have a maturity of 10 years and are viewed by investors as being of about the same risk as the Lady bonds, but carry a 5% coupon. Assume market interest rates rise by five percentage points. The value of the ________ bonds will fall by $________ more than the bonds of their competitor. (Assume all bonds pay interest annually.)
Options:
Limbaugh; $83.52
Lady; $14.46
Lady; $35.92
Lady; $103.67
Limbaugh; $38.52
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
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