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What will be the value of each of these bonds when going

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The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year.

A). What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 8 percent, and (3) 12 percent? Assume that there is only one more interest payment to be made on Bond S.

B). Why does the longer-term (15 yr) bond fluctuate more when the interest rates change than does the shorter term bond (1 yr)?

Reference no: EM13478355

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