Problem:
Two firms (A and B) have $1,000 par value bond issues outstanding that have the same maturity (20 years) and risk. Firm A's bond has an 8% annual coupon rate, while Firm B's bond has an 8% semiannual coupon rate.
Required:
Question: If the nominal required rate of return, rd, is 12%, semiannual basis, for both bonds, what is the difference in current market prices of the two bonds?
Note: Show all workings.