Problem 7-18 Interest Rate Risk (LO2)

Bond J is a 4.1% coupon bond. Bond K is a 10.1% coupon bond. Both bonds have 15 years to maturity, make semiannual payments and have a YTM of 71%. (Do not round intermediate calculations. Negative answers should be indicated by a minus sign. Round the final answers to 2 decimal places.)

If Interest rates suddenly rise by 2%, what is the percentage price change of these bonds?

Percentage change in price of Bond J. ____%

Percentage change in price of Bond K. ____%

What If rates suddenly fall by 2% instead?

Percentage change in price of Bond J. ____%

Percentage change in price of Bond X. ____%