Question: John owns a corporate bond with a coupon rate of 8% that matures in 10 years. Bill owns a corporate bond with a coupon rate of 12% that matures in 25 years. If interest rates go down, then
A:the value of John's bond will decrease and the value of Bill's bond will increase.
B:the value of both bonds will increase.
C:the value of Bill's bond will decrease more than the value of John's bond due to the longer time to maturity.
D:the value of both bonds will remain the same because they were both purchased in an earlier time period before the interest rate changed.
Answer: A:the value of John's bond will decrease and the value of Bill's bond will increase. Edit
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