Question

5. The Mariposa Co. has two bonds outstanding. One was issued 25 years ago at a...

5. The Mariposa Co. has two bonds outstanding. One was issued 25 years ago at a coupon rate of 9%. The other was issued 5 years ago at a coupon rate of 9%. Both bonds were originally issued with terms of 30 years and face values of $1,000. The going interest rate is 14% today.

a. What are the prices of the two bonds at this time?

b. Discuss the result of part a. in terms of risk in investing in bonds.

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