Question

Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 19 years to maturity. (Do not round your intermediate calculations.)

   

Requirement 1:

(a)	If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam?
	(Click to select)  -5.16%  5.22%  -5.44%  5.53%  -5.14%

    

(b)	If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Dave?
	(Click to select)  -18.05%  19.58%  -22.03%  -18.03%  24.37%

    

Requirement 2:

(a)	If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then?
	(Click to select)  -5.11%  5.51%  5.22%  5.49%  5.56%

    

(b)	If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Dave be then?
	(Click to select)  24.40%  19.58%  24.35%  24.33%  -18.00%

Answer 1