Question: 5. Interest Rate Risk Collapse . Both Bonds A and B are priced at par since their YTMs are the same as their coupon rate

5. Interest Rate Risk Collapse . Both Bonds A and B are priced at par since their YTMs are the same as their coupon rate of 7%. What happens to their prices if interest rate in the market rises by 2%? What if the interest rate falls by 2%? Compute the prices in $ and also the percentage change.

Bond A:		Bond B:
Coupon rate	7%	Coupon rate	7%
Settlement date	1/1/2000	Settlement date	1/1/2000
Maturity date	1/1/2003	Maturity date	1/1/2020
Redemption (% of par)	100	Redemption (% of par)	100
# of coupons per year	2	# of coupons per year	2

YTM	7%

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