In: Finance
Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 18 years to maturity. (Do not round your intermediate calculations.) |
Requirement 1: |
(a) | If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Sam? |
(Click to select) -9.69% -9.67% 9.90% -10.74% 11.01% |
(b) | If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Dave? |
(Click to select) -33.01% 27.66% -24.82% 38.25% -24.80% |
Requirement 2: |
(a) |
If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Sam be then? |
(Click to select) 9.90% 11.04% 10.99% -9.64% 10.97% |
(b) |
If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Dave be then? |