Question: initial rate is 6% 5. Interest rates fall to 4%. a. What is the current price of the 2 year, 4% coupon bond? b. What

initial rate is 6%

5. Interest rates fall to 4%. a. What is the current price of the 2 year, 4% coupon bond? b. What is the current price of the 10 year, 4% coupon bond? c. Calculate the percent change in price of each bond (i.e., the 2 yr and 10 yr) due to the rate decrease 6. Now consider your responses to Question 5. Which bond was more sensitive to the change in interest rates

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