Question

In: Finance

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?

Solutions

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
Next > < Previous

Related Solutions

Bond J is a 4 percent coupon bond. Bond K is a 12 percent coupon bond.
Interest Rate Risk [LO2] Bond J is a 4 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have nine years to maturity, make semiannual payments, and have a YTM of 8 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of...
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of 14 percent. Both bonds have 17 years to maturity, a par value of $1,000, and a YTM of 8 percent, and both make semiannual payments. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as...
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of...
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of 11 percent. Both bonds have 8 years to maturity, make semiannual payments, and have a YTM of 6 percent.    If interest rates suddenly rise by 4 percent, what is the percentage price change of Bond J? -22.82% -21.82% -20.82% -22.80% 31.22%    If interest rates suddenly rise by 4 percent, what is the percentage price change of Bond K? -19.77% -17.77% 39.84% -19.75%...
Bond J has a coupon rate of 4 percent and Bond K has a coupon rate...
Bond J has a coupon rate of 4 percent and Bond K has a coupon rate of 10 percent. Both bonds have 17 years to maturity, make semiannual payments, and have a YTM of 7 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal...
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of...
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of 10 percent. Both bonds have 7 years to maturity, make semiannual payments, and have a YTM of 7 percent.    If interest rates suddenly rise by 5 percent, what is the percentage price change of Bond J?    If interest rates suddenly rise by 5 percent, what is the percentage price change of Bond K?    If interest rates suddenly fall by 5 percent,...
Bond J is a 5 percent coupon bond. Bond K is a 11 percent coupon bond....
Bond J is a 5 percent coupon bond. Bond K is a 11 percent coupon bond. Both bonds have 10 years to maturity, make semiannual payments, and have a YTM of 7 percent. Requirement 1: (a) If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J? (b) If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K? Requirement 2: (a) If interest rates suddenly fall by...
Bond J is a 3 percent coupon bond. Bond K is a 12 percent coupon bond....
Bond J is a 3 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have 9 years to maturity, make semiannual payments, and have a YTM of 8 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead?
Bond J is a 6 percent coupon bond. Bond K is a 10 percent coupon bond....
Bond J is a 6 percent coupon bond. Bond K is a 10 percent coupon bond. Both bonds have 10 years to maturity, make semiannual payments, and have a YTM of 8 percent. If interest rates suddenly fall by 2 percent, the percentage change in price of Bonds J and K is ____ percent and _____ percent, respectively. (Negative amounts should be indicated by a minus sign. Do not include the percent signs (%). Round your answers to 2 decimal...
Bond J has a coupon of 4.2 percent. Bond K has a coupon of 8.2 percent....
Bond J has a coupon of 4.2 percent. Bond K has a coupon of 8.2 percent. Both bonds have 10 years to maturity and have a YTM of 6 percent. a. If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds? Bond J: Bond K: b. If interest rates suddenly fall by 1 percent, what is the percentage price change of these bonds? Bond J: Bond K:
Bond J has a coupon of 7.2 percent. Bond K has a coupon of 11.2 percent....
Bond J has a coupon of 7.2 percent. Bond K has a coupon of 11.2 percent. Both bonds have 12 years to maturity and have a YTM of 8.4 percent. a. If interest rates suddenly rise by 1.8 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) %Δ in Price Bond J: %...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT