Consider two bonds, UPS and Fed EX. Each bond has an annual coupon rate of 10% and is a par bond. Bond UPS has a maturity of 25 years, while bond Fed Ex has a maturity of 30 years. If the yield to maturity on both bonds increases by 2%, _________.

Options

1. Both bonds will increase in value but bond Fed Ex will increase more than bond UPS

2. Both bonds will decrease in value but bond UPS will decrease more than bond Fed Ex

3. Both bonds will increase in value but bond UPS will increase more than bond FedEx

4. Both bonds will decrease in value but bond Fed Ex will decrease more than bond UPS

5. Can't be determined