+2%		-2%
Bond Bill:
Coupon rate	6%
Settlement date
Maturity date
Face value				use $1,000 here
# of coupons per year
Bond Ted:
Coupon rate
Settlement date
Maturity date
Face value				use $1,000 here
# of coupons per year
Change in interest rate

Interest Rate Risk. Both Bond Bill and Bond Ted have 6.2 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 25 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? Both bonds have a par value of $1,000. If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds