Page 1 Interest Rate Risk Bond D has a coupon of 4.50%. Bond M has a coupon rate of 7.75%. Both have 12.5 years to maturity, make semiannual payments, and have a YTM of 6.25%. If interest rate rise by 2%, what is the percentage price change of each of these bonds? What if rates fall by 2% instead? What does this problem tell you about the interest rate risk of lower-coupon bonds? Input area Bond D Coupon rate Initial yield to maturity Settlement date Maturity date Face value #of coupons per year Bond M Coupon rate Initial yield to maturity Settlement date Maturity date Face value # of coupons per year Change in interest rate Output area Initial price of Bond D Price after change Initial price of Bond M Price after change % change in Bond D % change in Bond M LowerCoupon Bond Intuition