Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, an

Question

Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has six years to maturity, whereas Bond Dave has 19 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Bond 9.1 Sam Percentage change in price of Bond Dave If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g. 32.16.) Percentage change in price of Bond Sam Percentage change in price of Bond Dave

Explanation / Answer

a) Assuming %ge change in bond price of Dave as 'x' then 2x=-9.15%=-4.58%

b) Assuming %ge change in bond price of Dave as 'x' then

2x=10.26%=5.13%

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