Question
Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to
Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 15 years to maturity. If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Sam? If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Dave? If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Sam be then? If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Dave be then?
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