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Bond J is a 4 percent coupon bond. Bond K is a 9 percent coupon bond....

Bond J is a 4 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 8 years to maturity, make semiannual payments, and have a YTM of 9 percent. Requirement 1: (a) If interest rates suddenly rise by 5 percent, what is the percentage price change of Bond J? (b) If interest rates suddenly rise by 5 percent, what is the percentage price change of Bond K? Requirement 2: (a) If interest rates suddenly fall by 5 percent, what is the percentage price change of Bond J? (b) If interest rates suddenly fall by 5 percent, what is the percentage price change of Bond K?

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Expert Solution

REQUIREMENT 1 : BOND J : -26.63%, BOND K : -23.62%

REQUIREMENT 2 : BOND J : 39.05%, BOND K : 33.94%

jeff jeffy answered 1 year ago
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