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Lillias, Inc. has two bonds' issues outstanding, called Series A and Series B both paying the same coupon payment of $55 and with par value
Lillias, Inc. has two bonds' issues outstanding, called Series A and Series B both paying the same coupon payment of $55 and with par value of $1,000. Series A has a maturity of 12 years, whereas Series B has a maturity of 1 year. The value of the bond varies according to different nterest rate as follows: a. Calculate the price of the bond Series A (i) if the interest rate is 4 percent. (4 marks) b. Calculate the price of the bond Series B (ii) if the interest rate is 10 percent. (4 marks) Based on the value of bond, why does the longer term (12 year) bond fluctuate more when interest rates change as compared to the shorter term ( 1 year) bond. (2 marks
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