Question

On May 30, 2012, Janice Kerr is considering one of the newly issued 10- year AAA corporate bonds:
a. Suppose that market interest rates decline by 100 basis points (i. e., 1 percent). Contrast the effect of this decline on the price of each bond.
b. Should Kerr prefer the Colina over the Sentinel bond when rates are expected to rise or to fall?
c. What would be the effect, if any, of an increase in the volatility of interest rates on the prices of each bond?


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  • CreatedJune 21, 2015
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