Solved: If interest rates increase so that the yield on both issues, Business Economics

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If interest rates increase so that the yield on both issues

Assume that Bond A and Bond B are identical in every way except for the coupon rate (i.e., both bonds have the same par value, maturity, and yield to maturity or required rate of return). Bond A has a 12% coupon rate and Bond B is a zero coupon bond. Both bonds have a yield to maturity of 8% per year. If interest rates increase so that the yield on both issues increases to 10%, what would happen to the price of the bonds?

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Business Economics: If interest rates increase so that the yield on both issues

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