Question: Consider the following three bonds with $1,000 face value: Bond A: 10-year, 10 percent coupon bond Bond B: 10-year, zero-coupon bond Bond C: 20-year, 10

Consider the following three bonds with $1,000 face value:

Bond A: 10-year, 10 percent coupon bond

Bond B: 10-year, zero-coupon bond

Bond C: 20-year, 10 percent coupon bond

Compute the market values of each of the three bonds when the market interest rate varies from 0 to 14 percent. What is your interpretation of the decreasing relationship between bond market prices and interest rates?

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