Bond J has a coupon rate of 4.2 percent. Bond K has a coupon rate of 14.2 percent. Both bonds have ten years to maturity, par value of $1,000, and a YTM of 9.4 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 a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Bond J has a coupon rate of 4.2 percent. Bond K has a coupon rate of 14.2 percent. Both bonds have ten years to maturity, par value of $1,000, and a YTM of 9.4 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 a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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Transcribed Image Text:Bond J has a coupon rate of 4.2 percent. Bond K has a coupon rate of 14.2 percent. Both
bonds have ten years to maturity, a par value of $1,000, and a YTM of 9.4 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 a percent rounded to 2
decimal places, e.g., 32.16.)
b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in
the price of these bonds? (Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a.
Percentage change in price
b. Percentage change in price
Bond J
%
%
Bond K
do do
%
%
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