1. Suppose there are two bonds you are considering:

	Bond A	Bond B
Maturity (years)	20	30
Coupon rate (%)  (paid semiannually)	12	8
Par Value	$1,000	$1,000

 

a.  If both bonds had a required rate of return of 10%, what would the bonds' prices be?

b.  Based on results in part (a), would you consider both bonds to be selling at a discount, premium, or at par?

c.  Re-calculate the prices of the bonds if the required return falls to 9%.