CH 13 QUIZ 60

CH  13  QUIZ  60
 You are considering the purchase of two $1000 bonds, both issued by Tranig Corp. Your expectation is that interest rates will drop and
you want to buy the bond which provides the maximum capital gains potential. The first Tranig bond has a coupon rate of 6 percent with
five years to maturity, while the second has a coupon rate of 9 percent and comes due six years from now. If market rates of interest are 8
percent for both bonds, which bond has the best price potential? (Use duration to answer the question.)

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