Laurel, Inc., and Hardy Corp. both have 7 percent coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1,000. The Laurel, Inc., bond has five years to maturity, whereas the Hardy Corp. bond has 20 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of each bond? (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 rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of each bond? (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 of Laurel, Inc., bond Percentage change in price of Hardy Corp. bond % b. Percentage change in price of Laurel, Inc., bond % Percentage change in price of Hardy Corp. bond
Laurel, Inc., and Hardy Corp. both have 7 percent coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1,000. The Laurel, Inc., bond has five years to maturity, whereas the Hardy Corp. bond has 20 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of each bond? (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 rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of each bond? (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 of Laurel, Inc., bond Percentage change in price of Hardy Corp. bond % b. Percentage change in price of Laurel, Inc., bond % Percentage change in price of Hardy Corp. bond
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 17P
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