Question
Two bonds A and B have the same credit rating, the same par value, and the same coupon rate. Bond A has 30 years to
Two bonds A and B have the same credit rating, the same par value, and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions: Discuss which bond will trade at a higher price in the market Discuss what happens to the market price of each bond if the interest rates in the economy go up. Which bond would have a higher percentage price change if interest rates go up? Please substantiate your argument with numerical examples. As a bond investor, if you expect a slowdown in the economy over the next 12 months, what would be your investment strategy? please answer each of the question
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