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Consider Two Bonds,A and B

Question 60

Multiple Choice

Consider two bonds,A and B.Both bonds presently are selling at their par value of $1,000.Each pay interest of $120 annually.Bond A will mature in 5 years while bond B will mature in 6 years.If the yields to maturity on the two bonds change from 12% to 14%,_________.


A) both bonds will increase in value but bond A will increase more than bond B
B) both bonds will increase in value but bond B will increase more than bond A
C) both bonds will decrease in value but bond A will decrease more than bond B
D) both bonds will decrease in value but bond B will decrease more than bond A

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