ABC Company Has Two Bonds Outstanding That Are the Same

question 142

Multiple Choice

ABC company has two bonds outstanding that are the same except for the maturity date. Bond D matures in 4 years, while Bond E matures in 7 years. If the required return changes by 5 percent, then ________.

• A) bond D will have a greater change in price
• B) bond E will have a greater change in price
• C) the price of the bonds will be constant
• D) the percentage price change for the bonds will be equal

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