Find payments coupon bond

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Sami Company has a 4-year, 7% annual payments coupon bond with a $1,000 par value. Henchoz Inc. has an 8-year, 7% semi-annual payments coupon bond with a $1,000 par value. Both bonds are priced at par.

Which of the following statements is correct if the market yield decreases to 5%?

a) Sami Company's bond will have a higher percentage increase in its price than Henchoz Inc.'s bond.

b) The current yield of Henchoz Inc.'s bond will fall by more than that of Sami Company's bond.

c) Both bonds will have the same percentage increase in price.

d) Both bonds will reduce coupon rate to 5%.

e) For both bonds, YTM > Current Yield > Coupon rate.

Reference no: EM133062349

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