Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 9 percent. Both bonds have 9 years to maturity, make semiannual payments, and have a YTM of 7 percent. If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J? -17.95% -15.97% -16.97% -17.97% If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K? -14.82% -16.80% -16.82% 27.26% If Interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J? -17.99% 23.11% 23.09% -23.38% If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K? 21.46% -4.84% 21.34% O-16.84%

Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 9 percent. Both bonds have 9 years to maturity, make semiannual payments, and have a YTM of 7 percent. If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J? -17.95% -15.97% -16.97% -17.97% If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K? -14.82% -16.80% -16.82% 27.26% If Interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J? -17.99% 23.11% 23.09% -23.38% If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K? 21.46% -4.84% 21.34% O-16.84%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 18 years to maturity, make semiannual payments, and have a face value of $1000 and a YTM of 6 percent. a. 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? (Hint: % price change = 100% * (new price - old price)/old price) b. What does this problem tell you about the interest rate risk of lower coupon bonds? -
Bond J has a coupon rate of 3 percent and Bond K has a coupon rate of 9 percent. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? Percentage change in price of Bond J=? Percentage change in price of Bond K=? What if rates suddenly fall by 2 percent instead? Percentage change in price of Bond J=? Percentage change in price of Bond K=?
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