Question: Interest Rate Risk Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has

Interest Rate Risk Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave has. 15 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam of Bond Dave? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then of Bond Dave? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?

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