Question

Both Bond A and Bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while Bond B has 16 years to maturity.  

a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of Bond A and Bond B? 

Bond A = _______ %

Bond B = _______ %

b. If interest rates suddenly fall by 2.2 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.)

Bond A = _______ %

Bond B = _______ %

Bond J has a coupon of 7.4 percent. Bond K has a coupon of 11.4 percent. Both bonds have 12 years to maturity and have a YTM of 7.8 percent. 

a. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? 

Bond J = _______ %

Bond K = _______ %

b. If interest rates suddenly fall by 2 percent, what is the percentage price change of these bonds? 

Bond J = _______ %

Bond K = _______ %

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -