Question

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?

Answer 1