Question

If there are two $1,000 bonds that pay semi-annual coupons, one with a 30-year maturity and the other with a

10-year maturity and both with a coupon rate of 10%, what will happen to their values if market interest rates fall to 8%?

A. The value of the 30-year bond will be $90.33 lower than the 10-year bond

B. The value of the 10-year bond will be $90.33 lower than the 30-year bond

C. The value of the 30-year bond will be $51.17 lower than the 10-year bond

D. The value of the 10-year bond will be $51.17 lower than the 30-year bond

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