Bond A is a 4% coupon bond. Bond B is a 10% coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 9%.

a) If interest rates suddenly rise by 2%, what is the percentage price change of these bonds?

b)If rates suddenly fall by 2% instead what is the percentage price change of the

se bonds?

c)What does this problem tell you about the interest rate risk of lower-coupon bonds?