Determine the discount rate employ for pricing bond a

Reference no: EM13231697

Suppose you have been hired as a financial consultant, and your job is to price two bonds, A and B. The bonds are identical in every way (e.g. they have the same coupon payment, maturity data, etc.), except that A is "riskier" than B - i.e. you think the probability of full payment of principal and interest is lower for A than it is for B. Ceteris paribus, it follows that the discount rate you employ for pricing bond A will be ____ than that of bond B, and the price of bond A will be _____ than that of bond B.

Reference no: EM13231697

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