Question: Consider two default-free bonds, bond A and bond Q. Both bonds have the same face value, the same remaining time to maturity and the same

Consider two default-free bonds, bond A and bond Q. Both bonds have the same face value, the same remaining time to maturity and the same annual coupon rate. The investors in both bonds just received a coupon payment. Bond A has annual coupon payments and bond Q has quarterly coupon payments.

Discuss whether the value of bond A is higher, equal or lower than the value of bond Q. First assume a flat term structure of interest rate, and then discuss the implications of non-flat term structures of interest rates.

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