CH. 7, #6 Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual pa

Question

CH. 7, #6

Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity.

If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (Negative amounts 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.)

If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (Negative amounts 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.)

Explanation / Answer

Solution 7.Rise interest rate by 2% Percentage change in price of Bond Sam%      5% Percentage change in price of Bond Dave% 17% Interest rate fall by 2% Percentage change in price of Bond Sam 5% Percentage change in price of Bond Dave 23%

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