Question
In: Finance
Using the following information to answer the following questions? Both Bond A and Bond B have...
Using the following information to answer the following questions?
Both Bond A and Bond B have 8 percent coupons, make semiannual payments, and are priced at par value. Bond A has 3 years to maturity, whereas Bond B has 20 years to maturity.
a. If interest rates suddenly rise by 2 percent annually (to 10% annually right now), what would be the percentage changes in the prices of Bond A and Bond B?
b. If rates were to suddenly drop by 2 percent instead (to 6% right now), what would be the percentage changes in the prices of Bond A and Bond B?
c. What does this problem tell you about the interest rate risk of long-term bonds?
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
As nothing was mentioned excel is
used.
jeff jeffy answered 1 year agoRelated Solutions
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