Question: Please answer all parts to the question 1. Both Bond ABC and Bond XYZ have 5.2 percent coupons, make semiannual payments, and are priced at

Please answer all parts to the question 1. Both Bond ABC

Please answer all parts to the question

1. Both Bond ABC and Bond XYZ have 5.2 percent coupons, make semiannual payments, and are priced at par value. Bond ABC has 3 years to maturity, whereas Bond XYZ has 20 years to maturity. If interest rates suddenly rise by 1 percent, what is the percentage change in the price of Bond ABC? Of Bond XYZ? If rates were to suddenly fall by 1 percent instead, what would the percentage change in the price of Bond ABC be then? Of Bond XYZ? What does this problem tell you about the interest rate risk of longer-term bonds versus shorter-term bonds

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