Find value of bond if market interest rate increases

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You are considering bonds of two companies. Taxco's bond pay interest at 12 percent p.a. and Maxco's at 6 percent pa Both have face value of Rs 1000 and maturity of three years.

(a) What will be the values of bonds if the present market interest rate is 9 %?

(b) What will be value of bond if market interest rate increases to 12% and which bond declines more when interest rate? What is the reason?

Reference no: EM133074578

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