Question
Mac owns a bond with 3remaining years to maturity. Russell owns a bond with 6 remaining years to maturity. Both bonds are valued at par
Mac owns a bond with 3remaining years to maturity. Russell owns a bond with 6 remaining years to maturity. Both bonds are valued at par and have the same coupon rate and par value.Suppose the interest rate declines. Do the bonds increase or decrease in value, and whose bond is affected most?
A.Both bonds increase in value; Mac's bond increases more
B.Both bonds increase in value; Russell's bond increases more
C.Both bonds decrease in value; Mac's bond decreases more
D.Both bonds decrease in value; Russell's bond decreases more
E.Both bonds stay the same price
explanation
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