21 and 22

Bond price sensitivizy when bonds with an initial low market rate increase by 1%. Calculate the price of the bonds from Period 1 to Period 2 with the following data: Assume Cr= 2 [semiannual coupons] State all calculated bond prices as positive numbers. c) From above calculations, what can you conclude about the relative sensitivity of bond prices to changes in the bond's market rate with regard to the following bond charateristics? [i] Shorter maturity (e.g. 5-Year) versus longer maturity (e.g. 30-Year) bonds? [i] Lower coupon (e.g. 2% ) versus higher coupon (e.g. 8% ) bonds? Hint: Bond Price Sensitivity to its market rate is Interest Rate Risk ... in Module "2, you will learn that this can be characterized by Duration properties of bonds