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Consider two bonds, a 3-year bond paying an annual coupon of 5.50% and a 10-year bond also with an annual coupon of 5.50%. Both currently

Consider two bonds, a 3-year bond paying an annual coupon of 5.50% and a 10-year bond also with an annual coupon of 5.50%. Both currently sell at face value of $1,000. Now suppose interest rates rise to 9%.

a) What is the new price of the 3-year bonds?

b) What is the new price of the 10-year bonds?

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