Price of the shorten term bond when interest rate change

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An investor has two bonds in his portfolio that have a face value of $ 1,000 and pay a 10% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year. a. What will the value of each bond be if the going interest rate is 5%, 8%, and 12%? assume that only one more interest payment is to be made on bond s at its maturity and that 15 more payment are to be made on bond L. B why does the longer- term bond price vary more than the price of the shorten- term bond when interest rate change?

Reference no: EM131905793

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