Bond Valuation and Interest Rate Risk
The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
What will be the value of each of these bonds when the going rate of interest is 4%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L $
Bond S $
What will be the value of each of these bonds when the going rate of interest is 15%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L $
Bond S $