Both bond A and bond B have 8.8 percent coupons and are priced at par value. Bon

Question

Both bond A and bond B have 8.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while bond B has 18 years to maturity.

a. If interest rates suddenly rise by 1.4 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.)

Bond A % =

Bond B % =

b. If interest rates suddenly fall by 1.4 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.)

Bond A % =

Bond B % =

Explanation / Answer

Both bond A and bond B have 8.8 percent coupons and are priced at par value. Bon

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