Bond J is a 3 percent coupon bond. Bond K is a 10 percent coupon bond. Both bond

Question

Bond J is a 3 percent coupon bond. Bond K is a 10 percent coupon bond. Both bonds have 10 years to maturity, make semiannual payments, and have a YTM of 8 percent.

Requirement 1:
(a) If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J?

(b) If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K?
Requirement 2:
(a) If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J?

(b) If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K?

Explanation / Answer

2.1 1,4 1.9 0.9

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