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Two bonds have a coupon rate of 5.25 percent, semi-annual payments, face values of $1,000, and yields to maturity of 6.1 percent. Bond S matures
Two bonds have a coupon rate of 5.25 percent, semi-annual payments, face values of $1,000, and yields to maturity of 6.1 percent. Bond S matures in 5 years and bond L matures in 10 years. Using a change in YTM from 4.50% to 5.50%, what is the difference in the interest rate risk of the two bonds? Calculate the difference as (Interest rate risk of Bond S Interest rate risk of bond L):
A. | 5.158% | |
B. | None of the above | |
C. | -3.181% | |
D. | 3.181% | |
E. | -5.158% |
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