What will be the value of each of these bonds

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Reference no: EM131867879

The Cocoa Cola 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%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment to be made on Bond S.

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

Please show workings for both a and b

Reference no: EM131867879

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