Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced...

Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave has 17 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?

(b)	If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Dave?

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?

(b)	If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Dave be then?

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Expert Solution

jeff jeffy answered 1 year ago

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