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Company A has two 9% coupon bonds outstanding. Each of the bonds pays interest annually. Bond A has ...

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Company A has two 9% coupon bonds outstanding. Each of the bonds pays interest annually. Bond A has ...

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%?

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

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

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

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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

Edition: 4^th

Authors: Brigham, Ehrhardt, Gessaroli, Nason

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