Question
Oliver Inc. has two 4% coupon bonds outstanding. Each of the bonds pays interest annually. Bond A has 8 years to maturity and bond B
Oliver Inc. has two 4% coupon bonds outstanding. Each of the bonds pays interest annually. Bond A has 8 years to maturity and bond B has 25 years to maturity. The current market rate of return is 3%. What will happen if the market rate of return decreases to 1%?
| The price of the bonds will not change as the market rate of return has no effect on the value of the bond. | ||
| The percentage change in the price of bond A will be the same as the percentage change price in bond B. | ||
| The percentage change in the price of bond A will be less than the percentage change price in bond B. | ||
| The percentage change in the price of bond A will be greater than the percentage change price in bond B. |
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Fundamentals Of Investments
Authors: Charles J. Corrado
3rd Edition
0072829192, 978-0072829198
