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flemingpk flemingpk
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A year ago
Company A has two 9% coupon bonds outstanding. Each of the bonds pays interest annually. Bond A has 15 years to maturity and Bond B has 12 years to maturity. The current market rate of return is 7%. What will happen if the market rate of return decreases to 6%?


▸

The percentage change in the price of Bond A will be the same as the percentage change in the price of Bond B.



▸

The percentage change in the price of Bond A will be less than the percentage change in the price of Bond B.



▸

The percentage change in the price of Bond A will be greater than the percentage change in the price of Bond B.



▸

The price of the bonds will not change as the market rate of return has no effect on the value of the bond.

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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navgilnavgil
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A year ago
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flemingpk Author
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A year ago
You make an excellent tutor!
Harvinder
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Yesterday
Helped a lot
ealvino1610
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2 hours ago
Thanks for your help!!
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