15-17, There are two bonds A and B. Both have the same maturity of 10 years. A has 3% coupon rate while B offers 10% coupon rate. The current yield to maturity for both bonds is 10%.

8.What are the bond prices?

Bond ABond B

9.If the YTM goes up to 15% for both bonds, what are the bond prices?

10.Which bond has larger price change?

18-19 The six-year 6.1% ANNUAL coupon bond above had a yield to maturity of 9% and an annual Macaulay Duration of 5.10.Convexity is 17.25. Assuming that the yield to maturity of 9% increases by 80 basis points to 9.8%.

11.How much is the bond price change (%) if we use duration only?

12.How much is the bond price change (%) if we use duration and convexity?