Question: P 6 - 2 1 Bond value and changing required returns Bond x has a coupon rate of 8 % and Bond Y pays a

P6-21 Bond value and changing required returns Bond x has a coupon rate of 8% and
Bond Y pays a 4% annual coupon. Both bonds have 10 years to maturity. The yield
to maturity for both bonds is now 8%.
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?
P6-21 Bond value and changing required returns Bond x has a

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