Question: Consider two recent bond issues by Microsoft: both have face values of $1,000 and coupon rates of 10% but one bond (the short bond) has

Consider two recent bond issues by Microsoft: both have face values of $1,000 and coupon rates of 10% but one bond (the short bond) has five years to maturity and the other (the long bond) has twenty years to maturity. Assume that yields fall from 15% to 5%. Which bond will experience a greater price increase, and by how much? Show Excel formulae and how you derived your answer.

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