Question
Both bond A and bond B have 8.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while bond
| Both bond A and bond B have 8.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while bond B has 18 years to maturity. |
| a. | If interest rates suddenly rise by 1.4 percent, what is the percentage change in price of bond A andbond B?(Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
| Bond A | % |
| Bond B | % |
| b. | If interest rates suddenly fall by 1.4 percent instead, what would be the percentage change in price of bond A and bond B?(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
| Bond A | % |
| Bond B | % |
|
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Case Studies in Finance Managing for Corporate Value Creation
Authors: Robert F. Bruner, Kenneth Eades, Michael Schill
7th edition
007786171X, 77861711, 978-0077861711
