Problem

Rank the interest rate sensitivity of the following pairs of bonds. a. Bond A is an...

Rank the interest rate sensitivity of the following pairs of bonds.

a. Bond A is an 8% coupon, 20-year maturity bond selling at par value. Bond B is an 8% coupon, 20-year maturity bond selling below par value.

b. Bond A is a 20-year, noncallable coupon bond with a coupon rate of 8%, selling at par. Bond B is a 20-year, callable bond with a coupon rate of 9%, also selling at par.

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Solutions For Problems in Chapter 11