Question: ** Please show work or explain If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest

** Please show work or explain

If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest percentage increase in its value? (If you are uncertain, do the examples yourself before answering!)

a. A bond with 10 years to maturity, and a coupon rate of ZERO percent.

b. A bond with 10 years to maturity, and a coupon rate of TEN percent.

c. A bond with 5 years to maturity, and a coupon rate of ZERO percent.

d. A bond with 5 years to maturity, and a coupon rate of TWELVE percent.

e. None of these. If rates fall from 8 percent to 7 percent, the value of existing bonds will decrease in value, not increase.

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