Question
Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to
Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 14 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? 6.83% -6.71% -6.73% -7.22% If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Dave? -16.66% -19.99% -16.64% 17.55% If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? -6.68% 7.33% 6.83% 7.31% If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Dave be then? 21.28% 17.55% 21.26% -16.61%
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