​Moonlight, Inc. has issued two types of bonds. A1 and A2 . Bothof them is paying annual interst of 110 ​$. Maturity of A1 is 12 years. Maturity of A2 is 1  year.

a. Find the value A1 and A2 when the market interest rate is​(1) ​7 percent, (2) 9 ​percent, and​ (3) ​15percent? Assume thatthere is only one more interest payment to be made on the A2bonds.

b. Why does the ​(12​-year) bond fluctuate more when interestrates change than does the (1​-year) ​bond?

a. When market rate is 7  ​percent, the value of A1 bonds wouldbe ​$ nothing. ​(Round to the nearest​ cent.)

When market rate is 9 ​percent, the value of A1 bonds would be​$ nothing.  ​(Round to the nearest​ cent.)

When the market rate is 15 ​percent, the value of A1 bondswould be ​$ nothing.  ​(Round to the nearest​ cent.)

When the market rate is 7 ​percent, the value of Series A2 bondswould be ​$ nothing. ​(Round to the nearest​ cent.)

When the market rate is ​9 percent, the value of Series A2 bondswould be ​$ nothing.  ​(Round to the nearest​ cent.)

When the market rate is 15 ​percent, the value of Series A2bonds would be ​$ nothing.  ​(Round to the nearest​ cent.)

b. Why does the ​(12​-year) bond fluctuate more when interestrates change than does the ​(1 ​-year) ​bond?  ​(Select the bestchoice​ below.)

A. Because​ longer-term bondholders are locked into a particularinterest rate for a longer period of time and are therefore exposedto less interest rate risk.

B. Because​ longer-term bondholders are locked into a particularinterest rate for a longer period of time but are not exposed toany interest rate risk.

C. Because​ longer-term bondholders are locked into a particularinterest rate for a longer period of time and are therefore exposedto more interest rate risk.

D. Because​ longer-term bondholders are locked into a particularinterest rate for a longer period of time but are exposed to sameinterest rate risk as​ short-term bondholders.