Question

Billon Corporation has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bonds? Does this tell us anything about the relationship between coupon rate and interest rate risk?
Bond A: 10 years to maturity, 0% coupon, market interest rate is 9.62%.
Bond B: 10 years to maturity, 10% coupon, market interest rate is 9.62%.


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  • CreatedMarch 27, 2015
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