both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced...

both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 5 years to maturity, whereas Bond Dave has 18 years to maturity.

(a)

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

(b)

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

Requirement 2:

(a)

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

(b)

If rates were to suddenly fall by 3 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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