24b

a) Bond price sensitivity of bonds at different level of bond market rates, maturity, and coupon rates. Transfer your calculated results from [21.c] and [23.c] to the following table: b) From above table, compare and comment on the bond price sensitivity of bonds with a 1% change in market rate for bonds with a low initial market rate [5%4%] versus that of a much higher initial market rate [11%12%] against bonds with different levels of maturity and coupon rates. Hint: see lecture notes on "Properties of Bond Duration": Put your responso below: Remember, bond price sensitvity to changing bond market rates, I.e. potontial Inforest Rafo Risk, are Influenced by these three bond characteristics: Maturity, Coupon Rate, Initial (i.e. current) Market Rate of bond. These three factors are convenienty captured as a single number in Bond Duration measure. i.e. Duration is an approximate indicator of potential Interest Rate Risk