Question
Bond J has a coupon rate of 4.8 percent. Bond K has a coupon rate of 14.8 percent. Both bonds have eleven years to maturity,
| Bond J has a coupon rate of 4.8 percent. Bond K has a coupon rate of 14.8 percent. Both bonds have eleven years to maturity, a par value of $1,000, and a YTM of 10.6 percent, and both make semiannual payments. |
| a. | If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
a.Percentage change in price%%
Bond J Bond K
b.Percentage change in price%%
Bond J Bond K
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
