Question

If interest rates are expected to remain constant, what is the best estimate of the remaining life left for BTR Co.'s bonds?

a. 5 years

b. 13 years

c. 10 years

d. 8 years

Answer 1

If interest rates are expected to remain constant, the best estimate of the remaining life for BTR Co.'s bonds would be 10 years.

Step-by-step explanation:

When interest rates rise, the value of existing bonds decreases. This is because new bonds are issued with higher interest rates, making existing bonds less attractive in comparison. If interest rates are expected to remain constant, the remaining life of BTR Co.'s bonds would be the same as the original maturity of the bond. Therefore, the best estimate of the remaining life would be 10 years.