Bond X pays an 8% annual coupon and Bond Y pays a 4% annual coupon. Both bonds
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Bond X pays an 8% annual coupon and Bond Y pays a 4% annual coupon. Both bonds have 10 years to maturity. The yield to maturity for both bonds is now 8%.
a. If the interest rate suddenly rises by 2%, by what percentage will the price of the two bonds change?
b. If the interest rate suddenly drops by 2%, by what percentage will the price of the two bonds change?
c. Which bond has more interest rate risk? Why?
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Related Book For
Principles Of Managerial Finance
ISBN: 9781292018201
14th Global Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Question Posted:
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