Milner's Tools has a 9-year, 7% annual coupon bond outstanding with a $1,000 par value. Carter's Tools has a 10-year, 6% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 6.5%. Which of the following statements is correct if the market yield increases to 6.75%?
A) Both bonds would decrease in value by 2.50%.
B) The Milner's bond will increase in value by $16.82.
C) The Milner's bond will increase in value by 1.63%.
D) The Carter's bond will decrease in value by 1.80%.
E) The Carter's bond will decrease in value by $16.82.
Correct Answer:
Verified
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