1) Sunshine Corporation has 2 bond issues outstanding, each with the par value of= $1,000. Information about each is given below. Assume market interest rates increase 1 percentage point across yield curve. What will be the change in price for each of bonds? Does this inform us anything about relationship between frequency of cash flows and interest rate risk?
Bond A: This bond is Eurobond. It has 10 years to maturity, pays 7% coupon, and market interest rate is 11.3%.
Bond B: This is issued in U.S. It has 10 years to maturity, pays 7% coupon, and market interest rate is 11.3%.
Requirements
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