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Bond J is a bond with a coupon rate of 4%. Bond K is a bond with a coupon rate of 10%. Both bonds have
Bond J is a bond with a coupon rate of 4%. Bond K is a bond with a coupon rate of 10%. Both bonds have an 8-year maturity, make semi-annual payments and have a yield to maturity of 9%. If interest rates suddenly increase by 2%, what is the percentage change in the price of these bonds? And if the rates suddenly drop by 2%? What does this problem tell you about the risk of risk of Lower coupon bond interest rates?
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