Question: Problem 6 - 2 0 Interest Rate Risk [ LO 2 ] Bond J has a coupon rate of 4 percent. Bond K has a

Problem 6-20 Interest Rate Risk [LO 2]
Bond J has a coupon rate of 4 percent. Bond K has a coupon rate of 14 percent. Both
bonds have 15 years to maturity, a par value of $1,000, and a YTM of 8 percent, and both
make semiannual payments.
a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price
of these bonds?
b. If interest rates suddenly fall by 2 percent instead, what is 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 6-20 Interest Rate Risk [LO 2] Bond J has a

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