Both Bond James and Bond Jason have 6.5% coupons, make semiannual payments, and are priced at par
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Question:
Both Bond James and Bond Jason have 6.5% coupons, make semiannual payments, and are priced at par value. James has 5 years to maturity whereas Jason matures in 12 years.
If interest rates rise by 2.5%, what is the percent change in bond prices?
If interest rates fall by 2.5%, what is the percent change in bond prices?
Which bond is more sensitive to change in interest rates?
(Calculate bond prices to support your answer.)
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