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What would the bonds prices be

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Reference no: EM133178833

Question - Suppose there are two bonds you are considering:

 

Bond A

Bond B

Maturity (years)

20Y

30Y

Annual Coupon rate (%)

12%

8%

Par Value

1000€

10000€

a) If both bonds had a required rate of return of 10%, what would the bonds' prices be?

b) Re-calculate the prices of the bonds if the required return falls to 9%. Could you explain why the price increases or decreases given this change in required return?

Reference no: EM133178833

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