*Unless otherwise stated, assume a $1,000 par value and semiannual coupon payment.* An investor evaluates two different

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*Unless otherwise stated, assume a $1,000 par value and
semiannual coupon payment.*
An investor evaluates two different bonds when the market
required return is 5%:
Bond 1 has a 7% coupon rate and 12 years to maturity and a value
of $1,178.85
Bond 2 has a 7% coupon rate and 6 years to maturity and a value
of $1,102.58
Calculate the value of the bonds and the percentage price change
if the required rate of return increases to 5.5%. Which bond had
the largest percentage price change? Explain the cause in the
difference in price changes