Question: Problem 6 - 1 9 Interest Rate Risk [ LO 2 ] The market interest rate is 1 0 % . Both Bond Bill and

Problem 6-19 Interest Rate Risk [LO 2]
The market interest rate is 10%. Both Bond Bill and Bond Ted have 10 percent coupons,
make semiannual payments, and are priced at par value ( $1,000). Bond Bill has 7 years
to maturity, whereas Bond Ted has 25 years to maturity.
a. If the market interest rate suddenly rises by 2 percent, what will be the percentage
change in the price of these bonds?
b. If the market rate suddenly falls by 2 percent instead, what will be the percentage
change in the price of these bonds?
c. Which of the two bonds has the greater price variablity in terms of percent?
Problem 6-19 Interest Rate Risk [LO 2] The market interest rate

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