Blackwater Industries just issued 12-year, 7% coupon bonds. Freshwater Enterprises just issued 12- year, 6% coupon bonds. Both bonds sold at par. Which one of the following statements is correct
Concerning these two bonds?
A) Both bonds will change in price by the same amount should the market rate of interest increase by 5%.
B) The Blackwater bonds will sell at a discount when the market rate is 7%.
C) The Freshwater bonds had a higher current yield than the Blackwater bonds when they were issued.
D) The Freshwater bonds are more interest rate sensitive than are the Blackwater bonds.
E) The Freshwater bonds will sell at a premium when the market rate is 8%.
Correct Answer:
Verified
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