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Calculate the prices of the bonds

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Reference no: EM132886113

Suppose there are two bonds you are considering:

                                  Bond A                     Bond B

Maturity (years)            15                 25

Annual Coupon rate (%)     6                4

Par Value                      1000                1000

Problem a. If both bonds had a required rate of return of 5%, what would the bonds' prices be?

Problem b. Re-calculate the prices of the bonds if the required return falls to 7%. Could you explain why the price increases or decreases given this change in required return?

Reference no: EM132886113

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