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Bond J has a 4 percent coupon. Bond K has a10percent coupon. Both bonds have 8years to maturity, make annual payments, and have a YTM
Bond J has a 4 percent coupon. Bond K has a10percent coupon. Both bonds have 8years to maturity, make annual payments, and have a YTM of 10percent. If interest rates suddenly fall to 4percent, what is the percentage price change in these bonds? If interest rates suddenly rise to 12percent, what is the percentage price change in these bonds? What does this say about the interest rate risk of lower-coupon bonds?
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