The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 maturity. Bond 1 has a maturity of 15 years, and Bond S has a maturity of 1 year.

A. What will be the value of each of these bonds when the going rate of interest is (1) 5% (2) 8% (3) 12%? Assume that there is only one more interest payment to be made on Bond S

B. Why does longer-term (15 year) bond fluctuate more when interest rate change than does the shorter-term bond (1 year)?