Both Bond A and Bond B have 9 % coupons, make semiannual payments, and are priced...

60.1K

Verified Solution

Question

Finance

Both Bond A and Bond B have 9 % coupons, make semiannualpayments, and are priced at par value. Bond A has 5 years tomaturity, whereas Bond B has 16 years to maturity.
A) If interest rates suddenly rise by 4 percent, what is thepercentage change in the price of A?
B) If interest rates suddenly rise by 4 percent, what is thepercentage change in the price of Bond B?
C) If rates were to suddenly fall by 4 percent instead, whatwould the percentage change in the price of Bond A be?
D) If rates were tosuddenly fall by 4 percent instead, what would the percentagechange in the price of Bond B be then?

Answer & Explanation Solved by verified expert

4.4 Ratings (559 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Both Bond A and Bond B have 9 % coupons, make semiannualpayments, and are priced at par value. Bond A has 5 years tomaturity, whereas Bond B has 16 years to maturity.A) If interest rates suddenly rise by 4 percent, what is thepercentage change in the price of A?B) If interest rates suddenly rise by 4 percent, what is thepercentage change in the price of Bond B?C) If rates were to suddenly fall by 4 percent instead, whatwould the percentage change in the price of Bond A be?D) If rates were tosuddenly fall by 4 percent instead, what would the percentagechange in the price of Bond B be then?