Question: Executive Joe Smith is looking at two corporate bonds, each with a maturity value of $100,000. Each bond matures in exactly 10 years and each

Executive Joe Smith is looking at two corporate bonds, each with a maturity value of $100,000. Each bond matures in exactly 10 years and each bond has a yield-to-maturity of 5%. Bond X pays a coupon of 8% and Bond Y pays a coupon of 3%. Which bond is more sensitive to changes in interest rates? If both bonds have the identical maturity date and YTM, then why do they trade at different prices? Is this a violation of The Law of One Price? If you buy Bond X, what is the NPV of the cash flows?

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