Consider Two Bonds, a and B

question 86

Multiple Choice

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays 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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Being most noticeable or important; prominently standing out.

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