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The bond J is a bond with a coupon rate of 4 % . The bond K is a bond with a coupon rate of

The bond J is a bond with a coupon rate of 4%. The bond K is a bond with a coupon rate of 10%. Both bonds have a maturity of 8 years, make semi-annual payments, and have a yield to maturity of 9%. If interest rates suddenly increase by 2%, what is the percentage change in the price of these bonds? And if the rates suddenly decrease by 2%? What does this problem teach you about the interest rate risk of low-coupon bonds? (5 Points)

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