Question
Both bond A and bond B have 9.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while bond
| Both bond A and bond B have 9.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while bond B has 20 years to maturity. |
| a. | If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of bond A and bond 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 2.2 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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Advanced Finance Theories
Authors: Ser-Huang Poon
1st Edition
9814460370, 978-9814460378
