Bond J is a 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds
ID: 2660603 • Letter: B
Question
Bond J is a 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 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 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 percent.
Explanation / Answer
If the bonds face value is 100
PV of J = $73.184
PV of K = $126.815
A 2% increase
PV of J = $ 60 .04 % change = -17.9%
PV of K = $ 107.991 %change =-14.84%
A 2% decrease
PV of J = $ 89.93 %change = 22.89%
PV of K = $150.3 %change = 18.5%