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Problem 6-25 Interest Rate Risk (LO3) Consider two bonds, a 3-year bond paying an annual coupon of 6.10% and a 10-year bond also with an
Problem 6-25 Interest Rate Risk (LO3) Consider two bonds, a 3-year bond paying an annual coupon of 6.10% and a 10-year bond also with an annual coupon of 6.10%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 9%. a. What is the new price of the 3-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Bond price b. What is the new price of the 10-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Bond price c. Which bonds are more sensitive to a change in interest rates? O Long-term bonds O Short-term bonds
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