G Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond A has a maturity of 15 years, and Bond B has a maturity of 1 year. What will be the value...

G Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond A has a maturity of 15 years, and Bond B has a maturity of 1 year.

1. What will be the value of each of these bonds when the going rate of interest is:

(1) 5%, (2) 8%, and (3) 12%?

Assume that there is only one more interest payment to be made on Bond B.

1. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?