Question

Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 12 years to maturity.

If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Sam? -12.42%, 12.78%, -12.40% ,-14.18%

If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Dave? -25.10%, -25.08% ,27.45% ,-33.51%

If rates were to suddenly fall by 4 percent instead, what would the percentage change in the price of Bond Sam be then? -12.37% , 12.78% , 14.63% , 14.65%

If rates were to suddenly fall by 4 percent instead, what would the percentage change in the price of Bond Dave be then? 37.81%, 37.83% , -25.05% , 27.45%

Answer 1