D$29$

Both Bond Sam and Bond Dave have $6\mathrm{.}5$ percent coupons, make semiannual payments, and are priced at par value. Bond Sam has $3$ years to maturity, whereas Bond Dave has $20$ 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? All bond price answers should be dollar prices.

Bond Sam:

Coupon rate Settlement date

Maturity date

Redemption $(\%$ of par$)$

# of coupons per year

Bond Dave:

Coupon rate

$6\mathrm{.}5\%$

Settlement date

$1/1/2000$

Maturity date

$1/1/2020$

Redemption $(\%$ of par$)$

$100$

Sheet$1\backslash$table$[[4,,,],[5,,,],[6,,$Bond Sam:,$],[7,,$Coupon rate,$6\mathrm{.}5\%],[8,,$Settlement date,$1/1/2000],[9,,$Maturity date,$1/1/2003],[10,,$Redemption $(\%$ of par$),100],[11,,$# of coupons per year,$2],[12,,,],[13,,$Bond Dave:,$],[14,,$Coupon rate,$6\mathrm{.}5\%],[15,,$Settlement date,$1/1/2000],[16,,$Maturity date,$1/1/2020],[,17,$Redemption $(\%$ of par$),100],[,18,$# of coupons per year,$2],[,19,,],[,20,$Par value for both bonds,$ $1,000],[,21,$Current YTM$,6\mathrm{.}5\%],[,22,$New YTM$,8\mathrm{.}5\%],[,23,$New YTM$,4\mathrm{.}5\%]]$Saved

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D$29$

A B

C

D

E

F

G

H

$1$

K

$28$

Price at current YTM:

$29$

$30$

$31$

Price of Bond Dave

$32$

$33$

Price if YTM increases:

$34$

Price of Bond Sam

$35$

$36$

Price of Bond Dave

$37$

$38$

$\%$ change in Bond Sam

$39$

$\%$ change in Bond Dave

$41$

$42$

$43$

Price if YTM decreases:

Price of Bond Sam

$44$

$45$

Price of Bond Dave

$46$

$47$

$48$

$49$

$\%$ change in Bond Sam

$\%$ change in Bond Dave