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

. Consider two bonds A and B. Both bonds are presently selling at their par

value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years while

bond B will mature in 15 years. If the yields to maturity on the two bonds change from

12% to 14%, then

  1. Both bonds will increase in value but bond A will increase more than bond B
  2. Both bonds will increase in value but bond B will increase more than bond A
  3. Both bonds will decrease in value but bond A will decrease more than bond B
  4. Both bonds will decrease in value but bond B will decrease more than bond A

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