An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 8% annual coupon. Bond L matures in 19 years, while Bond S matures in 1 year.
Assume that only one more interest payment is to be made on Bond S at its maturity and that 19 more payments are to be made on Bond L.
1. What will the value of the Bond L be if the going interest rate is 9%? Round your answer to the nearest cent.
2. What will the value of the Bond S be if the going interest rate is 9%? Round your answer to the nearest cent.