Question 4) Prices of long-term bonds tend to be more sensitive to interest rate changes than prices of short-term bonds. What is the DIFFERENCE in the percentage change in prices of the 10-year bond versus the 5-year bonds when both bond's yields to maturity go to 5%?

A) 3.4%

B) 1.0%

C) 7.8%

D) 4.1%

20 21 22 23 24 3. Prices of long-term bonds tend to be more sensitive to interest rate changes than prices of short-term bonds. long term short term Par $1,000 $1,000 $1,000 $1,000 Coupon rate 6.0% 6.0% 6.0% 6.0% years to maturity 10 10 5 5 yield to maturity 6.0% 5.0% 6.0% 5.0% Price $1,000.00 $1,077.95 $1,000.00 $1,043.76 change in price due to 1% yield chan 7.8% 4.4% 25 26 27 28 29