You are considering the following two bonds. Both bonds are trading at a YTM of 17%:

Long-High: Maturity 8 years, 15% coupon payable semi-annually, FV $1000

Short-Lo: Maturity 5 years, 2.5% coupon payable semi-annually, FV $1000

A. Calculate the interest rate risk of each bond.

Long-High:

Price 1 =

Price 2 =

Interest rate risk =

Short-Lo

Price 1 =

Price 2 =

Interest rate risk =

B. Calculate the duration of each bond (you may copy-paste your work from Excel here).

C. Compare your results from Part A and Part B. Do they confirm or contradict each other? Explain in a few words.