Bond
relationship?)
?Mason, Inc. has two bond issues? outstanding, called Series Aand Series? B, both paying the same annual interest of
?$110110.
Series A has a maturity of
1212
?years, whereas Series B has a maturity of
11
year.
a. What would be the value of each of thesebonds when the going interest rate is? (1)
44
?percent, (2)
99
?percent, and? (3)
1313
?percent? Assume that there is only one more interest payment tobe made on the Series B bonds.
b. Why does the? longer-term
?(1212?-year)
bond fluctuate more when interest rates change than does the?shorter-term
?(11?-year)
?bond?
