Question: You are given information concerning two issues of bonds, Bond X and Bond Y, which have a par value of RM100 per unit. Both bonds

You are given information concerning two issues of bonds, Bond X and Bond Y, which have a par value of RM100 per unit. Both bonds pays a coupon of 10% and are payable on a semi-annual basis. Bond X has 5 years to maturity, whereas Bond Y has 10 years to maturity. Both bonds are currently trading as the par value.

question.

a) compute the current yield and the current yield to maturity of each bond

b) If interest rate suddenly increases by 2% what is the percentage change in the price of Bond X and Bond Y

c) If interest rate suddenly drops by 2% what is the percentage change in the price of Bond X and Bond Y

d) What is the conclusions can you make based on your findings in (b) and (c) above?

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