Question
Calculate and discuss the price and difference between the following two bonds: NOTE: Pick your own rate and compare. A.) Bond A has a coupon
Calculate and discuss the price and difference between the following two bonds: NOTE: Pick your own rate and compare.
A.) Bond A has a coupon rate of 9.5% and maturity of 12 years and Bond B has a coupon rate of 6% and maturity of 15 years
B. ) Using duration what are the prices of the two bonds when interest rates increase by 200 basis points. By a 75-basis point increase? Why?
C.) What do you think will happen if two bonds are of similar duration to their price if interest rate go up by 100 basis points? Why?
Please explain and show all calculations
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