Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Assume that you have two bond investments and the information follows:
Bond A has a par value of $8,000, interest paid semi annual, maturity 2 years, stated interest rate is 6%.
Bond B has a par value of $8,000, interest paid semi annual, maturity 10 years, stated interest rate is 6%.
The interest rates are increasing to 7%. Assume that you can only sell one of the bonds, which bond will you sell before the interest rate changes to 7%? Explain and support your answer with a present value calculation.
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