Four coupon bonds are sold in the market with the following information:
Bond 1 Face value $1000 Coupon rate 5% Maturity 10 years
Bond 2 Face value $1000 Coupon rate 9% Maturity 10 years
Bond 3 Face value $1000 Coupon rate 7% Maturity 10 years
Bond 4 Face value $1000 Coupon rate 9% Maturity 30 years
(1) Without calculation, order the present values of the bonds from high to low under the constant interest rate of 7%. Hint: Your explanation is crucial because we require no calculation.
(2) Calculate the present value of the bonds under the constant interest rate of 7%.
(3) Now that all four bonds are sold at a same price. Is it true that people will surely buy the one with the highest present value calculated in (2)? If your answer is no, explain your reason.