Question
You are comparing two bonds, bond A has an annual coupon rate of 3% and bond B has a coupon rate of 9%. Yield to
You are comparing two bonds, bond A has an annual coupon rate of 3% and bond B has a coupon rate of 9%. Yield to maturity on both bonds is 6%. Both bonds have 19 years to maturity and make coupon payments semi-annually. If market interest rates suddenly jump by 2%, what is the percentage price change in each bond? Why is one bond more sensitive to the change in interest rate than the other?
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Focus On Personal Finance
Authors: Jack R. Kapoor, Les R. Dlabay Professor, Robert J. Hughes, Melissa Hart
5th Edition
0077861744, 978-0077861742
