Question

Assume you desire maximum duration to take advantage of anticipated interest rate declines. Answer the following questions based on information taken from Tables 18–6 and 18–7 on page 474.
a. Would you prefer an 8 percent coupon rate bond with a 20-year maturity or a 12 percent coupon rate bond with a 25-year maturity? The market rate of interest is 8 percent.
b. Would you prefer an 8 percent coupon rate bond with a 20-year maturity or a 4 percent coupon rate bond with a 25-year maturity? The market rate of interest is 12 percent.
c. Would you prefer an 8 percent coupon rate bond with a 20-year maturity or a 12 percent coupon rate bond with a 25-year maturity? The market rate of interest is 12 percent.


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  • CreatedSeptember 21, 2015
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