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Both Bond Sam and Bond Dave have 10 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to
| Both Bond Sam and Bond Dave have 10 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 16 years to maturity. (Do not round your intermediate calculations.) |
| Requirement 1: |
| (a) | If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Sam? |
| (Click to select) -9.11% 10.33% 9.35% -9.13% -10.05% |
| (b) | If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Dave? |
| (Click to select) -20.00% -19.98% 22.24% 28.62% -25.00% |
| Requirement 2: |
| (a) | If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Sam be then? |
| (Click to select) 9.35% 10.36% -9.08% 10.31% 10.29% |
| (b) | If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Dave be then? |
| (Click to select) 22.24% 28.65% 28.60% 28.58% -19.95% |
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