Question
Both Bond Bill and Bond Ted have 10.2 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 4 years to
Both Bond Bill and Bond Ted have 10.2 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 4 years to maturity, whereas Bond Ted has 21 years to maturity. Both bonds have a par value of 1,000.
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?
If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of these bonds?
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Valuation Measuring And Managing The Value Of Companies
Authors: McKinsey & Company Inc., Tom Copeland, Tim Koller, Jack Murrin
3rd Edition
0471361909, 978-0471361909
