The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 face value at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. What will be the value of each of these bonds when the going rate of market interest is 8%? What will be the value of each of these bonds when the going rate of market interest is 12%. what can you conclude from the results of the above questions?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 face value at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.

  1. What will be the value of each of these bonds when the going rate of market interest is 8%?
  2. What will be the value of each of these bonds when the going rate of market interest is 12%.
  3. what can you conclude from the results of the above questions?
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