8.

8-1) Both bond A and bond B have 7 percent coupons and are priced at par value. Bond A has 5 years to maturity, while bond B has 16 years to maturity.

a.) Assume if interest rates suddenly rise by 1.4 percent, what is the percentage change in price of bond A and bond B? (Round your answer to 2 decimal places. Negative answers should be indicated by a minus sign. Omit the "%" sign in your response.)

Bond A = ______%

Bond B = _____%

b) Assume if interest rates suddenly fall by 1.4 percent instead, what would the percentage change in price of bond A and bond B? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Bond A = _____%

Bond B = _____%

8-2) What is the Macaulay duration of a 8.8 percent coupon bond with five years to maturity and a current price of $956.20? What is the modified duration? (Round your answer to 3 decimal places.)

Macaulay = _____Years

Modified = _____ Years