I just can't figure out the bond calculation on this! Can you help me by walking through the steps?
Suppose there are two bonds each with coupon payments of $50. The first bond pays $1,000 in five years, and the other one pays $1,000 in ten years. If interest rates increased, would the value of the bonds increase or decrease? Which of the two bonds would have their value change more after the increase in interest rates?
(i) As the interest rates increased, the... View the full answer