In the past, Abbott Labs had two bond issues outstanding with the following characteristics.           Issue                              Interest Rate                 Maturity                    Current Price           A              6%         2008           115           B               6%          2012           118   Answer the following the questions regarding these bond issues.   Note that both issues are by the same company, have the same contract rate of interest, and have identical credit ratings. In view of these facts, explain the current price difference of each issue

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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In the past, Abbott Labs had two bond issues outstanding with the following characteristics.

          Issue                              Interest Rate                 Maturity                    Current Price

          A

             6%

        2008

          115

          B

              6%

         2012

          118

 

Answer the following the questions regarding these bond issues.

 

  1. Note that both issues are by the same company, have the same contract rate of interest, and have identical credit ratings. In view of these facts, explain the current price difference of each issue.

 

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