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What is the current price of the two bonds

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You are looking to invest some money for five years. Your attention has been drawn to two bonds, A and B, both issued by XYZ, Inc. and both having the same yield of 10 percent. The difference is that Bond A was issued 15 years ago, and it pays 15 percent annually. Bond B, on the other hand, has been issued today; its coupon payments are 5 percent annually. Both bonds will mature on the same day, exactly five years from now. The face value of each of the bonds is $1,000

a. What is the current price of each of the two bonds?

b. Which of the two bonds is a better buy for an investor considering holding the purchased bond to maturity? Why?

Reference no: EM132656423

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