Consider two zero coupon bonds. Both have face values of $100. Bond A pays its face value in 8 years, and Bond B pays its face in 2 years. If interest rates change from 9% to 7%, what is the percentage change in the long maturity bond's price minus the percentage change in the short maturity bond's price?
Consider two zero coupon bonds. Both have face values of $100. Bond A pays its face value in 8 years, and Bond B pays its face in 2 years. If interest rates change from 9% to 7%, what is the percentage change in the long maturity bond's price minus the percentage change in the short maturity bond's price?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter5: Bonds, Bond Valuation, And Interest Rates
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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![Consider two zero coupon bonds. Both have face values of $100. Bond A
pays its face value in 8 years, and Bond B pays its face in 2 years. If interest
rates change from 9% to 7%, what is the percentage change in the long
maturity bond's price minus the percentage change in the short maturity
bond's price?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa28881be-655a-4972-8125-5b4ade2f6135%2Fb5473719-abff-49db-b496-8b559efd9e28%2F8324lgq_processed.png&w=3840&q=75)
Transcribed Image Text:Consider two zero coupon bonds. Both have face values of $100. Bond A
pays its face value in 8 years, and Bond B pays its face in 2 years. If interest
rates change from 9% to 7%, what is the percentage change in the long
maturity bond's price minus the percentage change in the short maturity
bond's price?
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