Bond J is a 6 percent coupon bond. Bond K is a 12 percent coupon bond. Both bond
ID: 2653112 • Letter: B
Question
Bond J is a 6 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have 14 years to maturity, make semiannual payments, and have a YTM of 9 percent.
If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)))
What if rates suddenly fall by 2 percent instead? (Round your answers to 2 decimal places. (e.g., 32.16))
Bond J is a 6 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have 14 years to maturity, make semiannual payments, and have a YTM of 9 percent.
Explanation / Answer
1.
Percentage change in price of Bond J = -15.3%
Percentage change in price of Bond K = -13.38%
2.
Percentage change in price of Bond J = 19.35%
Percentage change in price of Bond K = 16.63%%