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Both bond sam and bond dave have 6.5 percent coupons, make semiannually payment, and are price at par value. Bond Sam has 3 years to

Both bond sam and bond dave have 6.5 percent coupons, make semiannually payment, and are price at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? Of Bond Dave? If interest rates suddenly fall by 2% instead, what would the percentage change in the price of Bond Sam be then? OF Bond Dave? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest risk of longer-term bonds?

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