Question: DO WITH CALCULATIONS: ANSWER ASAP A firm is considering a proposal to invest in either of two outstanding bonds, both having $ 1,000 par value

DO WITH CALCULATIONS: ANSWER ASAP

A firm is considering a proposal to invest in either of two outstanding bonds, both having $ 1,000 par value and 10% coupon interest rate. Both bonds pay interest annually. The maturity of bond A is 5 years while bond B has 15 years to maturity. Required: i. Explain which bond has greater price variability caused by a change in interest rates (i.e. 7%, 10% and 13%): that with the shorter maturity or the longer? ii. If the firm wants to minimize interest rate risk, which bond should it purchase?

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