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Bond L is a 4 percent coupon bond. Bond H is a 10 percent coupon bond. Both bonds have ten years to maturity, make semiannual
Bond L is a 4 percent coupon bond. Bond H is a 10 percent coupon bond. Both bonds have ten years to maturity, make semiannual payments and have a YTM of 7 percent. a) If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds? b) What if rates suddenly fall by 1 percent instead? c) What does this problem tell you about the interest rate risk of lower coupon bonds?
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