Consider Two Bonds, F and G

question 92

Multiple Choice

Consider two bonds, F and G. Both bonds presently are selling at their par value of $1,000. Each pays interest of $90 annually. Bond F will mature in 15 years while bond G will mature in 26 years. If the yields to maturity on the two bonds change from 9% to 10%,

• A) both bonds will increase in value, but bond F will increase more than bond G.
• B) both bonds will increase in value, but bond G will increase more than bond F.
• C) both bonds will decrease in value, but bond F will decrease more than bond G.
• D) both bonds will decrease in value, but bond G will decrease more than bond F.
• E) None of the options are correct.