Question
Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to
| Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave has 17 years to maturity. (Do not round your intermediate calculations.) |
| Requirement 1: |
| (a) | If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? |
| (b) | If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Dave? |
| Requirement 2: |
| (a) | If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? |
| (b) | If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Dave be then? |
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Investments Analysis And Management
Authors: Charles Jones, Nick Jones
11th Edition
0470477121, 9780470477120
