Enc owns a corporate bond with a coupon rate of 8% that matures in 10 years Rosa owns a corporale bond with a coupon rate of 12% that matures in 25 years If interest rates go down then OA the value of Enc's bond will decrease and the value of Rosa's bond will incense Os the value of both bonds will increase Octhe value of Rosa's bond will decrease more than the value of Ene's bond due to the longer time to malunty Oo the value of both bonds will reman the same because they were both purchased in an earter time period before the interest rate changed
Enc owns a corporate bond with a coupon rate of 8% that matures in 10 years Rosa owns a corporale bond with a coupon rate of 12% that matures in 25 years If interest rates go down then OA the value of Enc's bond will decrease and the value of Rosa's bond will incense Os the value of both bonds will increase Octhe value of Rosa's bond will decrease more than the value of Ene's bond due to the longer time to malunty Oo the value of both bonds will reman the same because they were both purchased in an earter time period before the interest rate changed
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Eric owns a corporate bond with a coupon rato of 8% that matures in 10 years Rosa owns a corporate bond with a coupon rate of 12% that matures in 25 years. If interest rates go down, then
On the value of Eric's bond will decrease and the value of Rosa's bond will increase
Os the value of both bonds will increase
Oc the value of Rosa's bond will decrease more than the value of Eric's bond due to the longer time to maunty
Oo the value of both bonds will remain the same because they were both purchased in an earlier time period before the interest rate changed
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