Bond Y is a $4\%$ coupon bond and Bond Z is a $9\%$ coupon bond. They both have $5$ years to maturity, make annual payments and have a YTM of $9\%.[$Use this for questions $1-3]$

If interest rates suddenly increase by $1\%,$ use the bond formula to calculate the percentage change in the price of Bond Y$.$

Flag question: Question $2$

Question $22$ pts

Bond Y is a $4\%$ coupon bond and Bond Z is a $9\%$ coupon bond. They both have $5$ years to maturity, make annual payments and have a YTM of $9\%.[$Use this for questions $1-3]$

If interest rates suddenly increase by $1\%,$ use the bond formula to calculate the percentage change in the price of Bond Z$.$

Flag question: Question $3$

Question $31$ pts

What do questions $1$ and $2$ tell you about interest rate risk?

Group of answer choices

When interest rates increase, bond prices decrease.

When interest rates decrease, bond prices increase.

The longer the time to maturity, the greater the interest rate risk.

The smaller the coupon rate, the greater the interest rate risk.