# Question: Bond A has the following terms Coupon rate of interest

Bond A has the following terms:

• Coupon rate of interest: 10 percent

• Principal: $1,000

• Term to maturity: 8 years Bond B has the following terms:

• Coupon rate of interest: 5 percent

• Principal: $1,000

• Term to maturity: 8 years

a. What should be the price of each bond if interest rates are 10 percent?

b. What will be the price of each bond if, after five years have elapsed, interest rates are 10 percent?

c. What will be the price of each bond if, after eight years have elapsed, interest rates are 8 percent?

• Coupon rate of interest: 10 percent

• Principal: $1,000

• Term to maturity: 8 years Bond B has the following terms:

• Coupon rate of interest: 5 percent

• Principal: $1,000

• Term to maturity: 8 years

a. What should be the price of each bond if interest rates are 10 percent?

b. What will be the price of each bond if, after five years have elapsed, interest rates are 10 percent?

c. What will be the price of each bond if, after eight years have elapsed, interest rates are 8 percent?

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