Question: Consider the two bonds described below: Bond A Bond B # of years to maturity 10 15 Coupon rate (%) (paid semiannually) 4 6 Par

Consider the two bonds described below:

Bond A

Bond B

# of years to maturity

10

15

Coupon rate (%) (paid semiannually)

4

6

Par value

$1,000

$1,000

  1. If both bonds had a required return of 5%, what would the bonds prices be?
  2. Describe what it means if a bond sells at a discount, a premium, and at its face amount (par value). Are these two bonds selling at a discount, premium, or par?
  3. If the required return on the two bonds rose to 7%, what would the bonds prices be?

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