Example Same Yield Change Different Maturities Recreate this example with yields rising to 6% instead of falling. ---5%, 5-year Note----- 5% coupo 5% yield 4% yield PV PV 50 47.62 48.08 50 45.35 46.23 43.19 44.45 50 41.14 42.74 1050 822.70 863.02 What happenings to the price changes 00 . ---5%, 20-year Bond--- 5% coupo 5% yield 4% yield PVPV 47.62 48.08 50 45.35 46.23 43.19 44.45 41.14 42.74 39.18 41.10 37.31 39.52 35.53 38.00 33.84 36.53 32.23 35.13 30.70 33.78 29.23 32.48 27.84 31.23 26.52 30.03 25.25 28.87 24.05 27.76 22.91 26.70 50 21.81 25.67 50 20.78 24.68 50 19.79 23.73 1050 395.73 479.21 8 13 1000 1000 sum Percentage change 1044.52 4.45 1135.90 13.59 Example II Given Change in Yield on Notes with different coupons, but same maturity same example but use a 10% coupon instead of a 5% coupon 6% yield 6% yield Coupon Rate 2% Initial yield 5% Coupon Initial Rate 5% yield 5% 20 20 19.05 18.14 17.28 16.45 799.20 20 18.87 17.80 16.79 15.84 762.20 50 50 50 47.62 45.35 43.19 41.14 822.70 47.17 44.50 41.98 39.60 784.62 20 50 1020 1050 870.12 1000.00 sum Percentage change 831.51 -4.44 957.88 -4.21 Example III Given Change in Yield on Notes with different coupons, but same maturity Extreme Case---Zero Coupon Bond Redo, but this time have rates fall from 5% to 4% What can we say about the relative price changes 33.25 --5%, 20-year Bond-- 5% coupo 5% yield 6% yield 47.62 47.17 45.35 44.50 43.19 41.98 41.14 39.60 39.18 37.36 37.31 35.25 35.53 33.84 31.37 32.23 29.59 30.70 27.92 29.23 26.34 27.84 24.85 26.52 23.44 25.25 22.12 24.05 20.86 22.91 19.68 21.81 18.57 20.78 17.52 50 19.79 16.53 1050 395.73 327.39 --zero coupon, 5% 20-y coupon 5% yield 6% yield 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2653.30 1000.00827.31 OOOOOOooooooooooo 20 1000 1000 sum Percentage change 885.30 -11.47 827.31 -17.27