Problem:
Two firms ( A amd B) have $1000 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 is 12%, semiannual basis, for both bonds, what is the difference in the current market prices of the two bonds?
Note: Please explain comprehensively and give step by step solution.