A Consider two bonds, A and B Both bonds presently are selling at their par value of $1,000 Each pay interest of $120 annually Bond A will mature in 5 years while bond B will mature in 6 years If the yields to maturity on the two bonds change from 12 to 14 a Both bonds will decrease in value but bond B will decrease more than bond A b Both bonds will increase in value but bond B will increase more than bond A c Bond A will increase in value, but Bond B will decrease in value d Both bonds will increase in value but bond B will increase more than bond A e Both bonds will increase in value but bond A will increase more than bond B B A coupon bond which pays interest of 4 semi annually, has a par value of $1,000, matures in 5 years, and is selling today at a $785 The actual yield to maturity on this bond is a 7 2 b 9 1 c 9 6 d 4 75 e 9 5 C A coupon bond which pays interest semi annually, has a par value of $1,000, matures in (exactly) 5 years and has a yield to maturity of 12 If the coupon rate is 9 , what would you expect to pay for this bond a $855 55 b $891 45 c $889 60 d $926 00 e $1,000 00

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Question: A. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pay interest of $120 annually. Bond

A. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pay interest of $120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%:

	a.	Both bonds will decrease in value but bond B will decrease more than bond A
	b.	Both bonds will increase in value but bond B will increase more than bond A
	c.	Bond A will increase in value, but Bond B will decrease in value.
	d.	Both bonds will increase in value but bond B will increase more than bond A
	e.	Both bonds will increase in value but bond A will increase more than bond B

B. A coupon bond which pays interest of 4% semi-annually, has a par value of $1,000, matures in 5 years, and is selling today at a $785. The actual yield to maturity on this bond is

	a.	7.2%
	b.	9.1%
	c.	9.6%
	d.	4.75%
	e.	9.5%

C. A coupon bond which pays interest semi-annually, has a par value of $1,000, matures in (exactly) 5 years and has a yield to maturity of 12%. If the coupon rate is 9%, what would you expect to pay for this bond?

	a.	$855.55
	b.	$891.45
	c.	$889.60
	d.	$926.00
	e.	$1,000.00

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