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Bond value and changing required returnsBond X has a coupon rate of 9%, and Bond Y pays a 4% annual coupon. Assume that both bonds
Bond value and changing required returnsBond X has a coupon rate of 9%, and Bond Y pays a 4% annual coupon. Assume that both bonds have a $1,000-par-value.Both bonds have 19 years to maturity. The yield to maturity for both bonds is now 9%.
a.If the interest rate rises by 2%, by what percentage will the price of the two bonds change?
b.If the interest rate drops by 2%, by what percentage will the price of the two bonds change?
c.Which bond has more interest rate risk? Why?
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