Discuss which bond will trade at higher price in the market

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Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has 5 years to maturity.

Question 1: Discuss which bond will trade at a higher price in the market

Question 2: Discuss what happens to the market price of each bond if the interest rates in the economy go up.

Question 3: Which bond would have a higher percentage price change if interest rates go up?

Question 4: Try to substantiate your argument with a numerical example. As a bond investor, if you expect slowdown in the economy over the next 12 months, what would be your investment strategy?

Reference no: EM132481929

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