Question: 4 ) Bond J is a 4 % coupon rate bond. The K bond is a 1 0 % coupon rate bond. Both bonds have

4) Bond J is a 4% coupon rate bond. The K bond is a 10% coupon rate bond. Both bonds have an 8-year maturity, make semi-annual payments and have a yield to maturity of 9%. If interest rates suddenly increase by 2%, what is the percentage change in the price of these bonds? What if rates suddenly drop 2%? What does this problem tell you about the interest rate risk of lower coupon bonds? Justify all of your response.

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