Both bond A and bond B have 6.8 percent coupons and are priced at par value. Bon

Question

Both bond A and bond B have 6.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while bond B has 15 years to maturity.

If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of bond A and bond B? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

If interest rates suddenly fall by 1.2 percent instead, what would be the percentage change in price of bond A and bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of bond A and bond B? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Current price: Bond A $ 1,000.00 Bond B $ 1,000.00 If interest rate rise by 1.2% Bond A $     925.04 -7.50% PV(8%,9,68,1000)*-1 Bond B $     897.29 -10.27% PV(8%,15,68,1000)*-1 If interest rate fall by 1.2% Bond A $ 1,083.06 8.31% PV(5.6%,9,68,1000)*-1 Bond B $ 1,119.65 11.97% PV(5.6%,15,68,1000)*-1

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