Question
Both Bond Alpha and Bond Beta have 8% coupons, $1,000 face-value, make semi-annual payments and are priced at par value. Bond Alpha has 2 years
Both Bond Alpha and Bond Beta have 8% coupons, $1,000 face-value, make semi-annual payments and are priced at par value. Bond Alpha has 2 years to maturity, whereas Bond Beta has 15 years to maturity.
- If interest rates suddenly rise by 2%, what is the percentage change in the price of Bond Alpha relative to the original price?
- If rates were to suddenly fall by 2%, what would the percentage change in the price of Bond Alpha relative to the original price?
- If interest rates suddenly rise by 2%, what is the percentage change in the price of Bond Beta relative to the original price?
- If rates were to suddenly fall by 2%, what would the percentage change in the price of Bond Beta relative to the original price?
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
