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In: Finance

Both Bond Sam and Bond Dave have 10 percent coupons, make semiannual payments, and are priced...

Both Bond Sam and Bond Dave have 10 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 17 years to maturity.

   

If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Sam?
   

  • -10.05%

  • -9.11%

  • -9.13%

  • 9.35%

    

If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Dave?
   

  • -20.36%

  • 22.81%

  • -20.34%

  • -25.57%

    

If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Sam be then?
   

  • -9.08%

  • 9.35%

  • 10.29%

  • 10.31%

    

If rates were to suddenly fall by 3 percent instead, what would the percentage change in the price of Bond Dave be then?
   

  • 29.55%

  • 29.53%

  • -20.31%

  • 22.81%

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Expert Solution

jeff jeffy answered 3 years ago
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