Question $11$

Question #$11$ to #$13$ uses the following setup:

Consider two bonds $($face value of $$100),$ each of which pays semiannual coupons and has

five years left until maturity. One has a coupon rate of $5\%$ and the other has a coupon rate

of $10\%.$

Both bonds have a yield to maturity $($YTM$)$ of $8\%.$

By what percentage will the price of the first bond $($i$.$e$.$ the one with a $5\%$ coupon rate$)$

increase if its YTM decreases from $8\%$ to $7\%?$

The growth rate in the bond's price is defined as $\frac{P_{\text{n}\text{e}\text{w}}-P_{\text{o}\text{l}\text{d}}}{P_{\text{o}\text{l}\text{d}}}$

A$.4\mathrm{.}0\%$

B$\mathrm{.}4\mathrm{.}1\%$

C$.4\mathrm{.}2\%$

D$.4\mathrm{.}3\%$

E$\mathrm{.}4\mathrm{.}4\%$

Question $12$

By what percentage will the price of the second bond $($i$.$e$.$ the one with a $10\%$ coupon rate$)$ increase if its YTM

decreases from $8\%$ to $7\%?$