Lady Products, Inc. just issued 10-year, 8% coupon bonds at par. Outstanding bonds of Limbaugh Corp. Lady's closest competitor, have a maturity of 10 years and are viewed by investors as being of about the same risk as the Lady bonds, but carry a 5% coupon. Assume market interest rates rise by five percentage points. The value of the ______ bonds will fall by $_____ more than the bonds of their competitor. (Assume all bonds pay interest annually.)
A) Lady; $14.46
B) Lady; $35.92
C) Lady; $103.67
D) Limbaugh; $83.52
E) Limbaugh; $38.52
Correct Answer:
Verified
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