Problem $6-20$ Interest Rate Risk $[$LO $2]$

Bond $J$ has a coupon rate of $4$ percent. Bond $K$ has a coupon rate of $14$ percent. Both

bonds have $15$ years to maturity, a par value of $$1,000,$ and a YTM of $8$ percent, and both

make semiannual payments.

a$.$ If interest rates suddenly rise by $2$ percent, what is the percentage change in the price

of these bonds?

b$.$ If interest rates suddenly fall by $2$ percent instead, what is the percentage change in

the price of these bonds?

c$.$ Which of the two bonds has the greater price variablity in terms of percent?