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Q5:The University of California has two bonds outstanding. Both issues have the same credit rating, a...

Q5:The University of California has two bonds outstanding. Both issues have the same credit rating, a face value of $1,000 and a coupon rate of 5%. Coupons are paid twice a year. Bond A matures in 1 year, while bond B matures in 30 years.The market interest rate for similar bonds is 10% (quoted as a semi-annual simple interest rate, so 5% per 6-month period).

a:What is the price of bond A?

b:What is the price of bond B?

c:Now assume that yields increase to 13%. What is the price of bond A?

d:What is now the price of bond B?

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jeff jeffy answered 1 year ago
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