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Corporate bonds: determining current price

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Cary owns the following two bonds of comparable quality and characteristics; what is the current price of Bond S?

Bond R Bond S
Term Left 15y 9y
Coupon Rate 5.625% 2.25%
Current Price 104.50 ?

a) Which is more volatile?
b) What is the price change of Bond R if its interest rates decline to 3.75%?

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Solution Summary

This solution shows how to compare the volatility of two comparable bonds and how to calculate the price change of Bond R if its interest rates decline.

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