Q- Both Bond Sam and Bond Dave have 6.3 percent coupons, make semiannual payments, and are priced at par value of Rs. 1000. Bond Sam has 13 years to maturity, whereas Bond Dave has 48 years to maturity.

a.If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? Of Bond Dave?

b.If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be the percentage change in the price of Bond Sam be then? Of Bond Dave?

c.What does your result in part (a) and (b) tell you about the interest rate risk of bonds?