Jackson Central has a 6-year,8% annual coupon bond with a $1,000 par value. Earls Enterprises has a 12-year,8% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 6%. Which of the following statements are correct if the market yield increases to 7%?
A) Both bonds would decrease in value by 4.61%.
B) The Earls bond will increase in value by $88.25.
C) The Jackson bond will increase in value by 4.61%.
D) The Earls bond will decrease in value by 7.56%.
E) The Earls bond will decrease in value by $50.68.
Correct Answer:
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