Problem $7-20$ Interest Rate Risk $[$LO$2]$

Bond $J$ has a coupon rate of $5$ percent and Bond $K$ has a coupon rate of $11$ percent. Both

bonds have $18$ years to maturity, make semiannual payments, and have a YTM of $8$

percent.

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

these bonds? $($A negative answer should be indicated by a minus sign. Do not

round intermediate calculations and enter your answers as a percent rounded to $2$

decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ What if rates suddenly fall by $2$ percent instead? $($Do not round intermediate

calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,$

$32\mathrm{.}16.)$Problem $7-20$ Interest Rate Risk $[$LO$2]$

Bond J has a coupon rate of $5$ percent and Bond K has a coupon rate of $11$ percent. Both bonds have $18$ years to maturity, make semiannual payments, and have a YTM of $8$ percent.

a$.$

If interest rates suddenly rise by $2$ percent, what is the percentage price change of these bonds? $($A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ What if rates suddenly fall by $2$ percent instead? $($Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$