Question
Please show all your calculations. 1) Both Bond X and Bond Y have 5% coupons, make semiannual payments, and have YTM of 4%. Bond X
Please show all your calculations.
1) Both Bond X and Bond Y have 5% coupons, make semiannual payments, and have YTM of 4%. Bond X has five years to maturity, whereas Bond Y has 20 years to maturity. If the interest rates (YTM) suddenly rise by 2 percent point to 6%, what is the percentage change in the price of Bond X and Bond Y? Based on your answer, what can you say about the relationship between the interest rate risk and the time to maturity?
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
6th International Edition
0071229035, 978-0071229036
