Question: Bond value and changing required returns Bond x has a coupon rate of 9 % , and Bond Y pays a 4 % annual coupon.

Bond value and changing required returns Bond x has a coupon rate of 9%, and Bond Y pays a 4% annual coupon. Assume that both bonds have a $1,000-par-value. Both bonds have 14
years to maturity. The yield to maturity for both bonds is now 9%.
a. If the interest rate rises by 2%, by what percentage will the price of the two bonds change?
b. If the interest rate drops by 2%, by what percentage will the price of the two bonds change?
c. Which bond has more interest rate risk? Why?
Bond value and changing required returns Bond x has a coupon

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