Question

Both Bond Sam and Bond Dave have 9 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 5 percent, what is the percentage change in the price of Bond Sam?
	(Click to select)  -14.93%  18.33%  15.48%  -17.55%  -14.91%

    

(b)	If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Dave?
	(Click to select)  -48.34%  -32.57%  38.92%  -32.59%  63.74%

    

Requirement 2:

(a)	If rates were to suddenly fall by 5 percent instead, what would the percentage change in the price of Bond Sam be then?
	(Click to select)  18.36%  18.31%  -14.88%  15.48%  18.29%

    

(b)	If rates were to suddenly fall by 5 percent instead, what would the percentage change in the price of Bond Dave be then?
	(Click to select)  63.72%  63.77%  -32.54%  38.92%  63.70%

Answer 1