Question: Problem 8-18 Interest Rate RISK Bond Sam and Bond Dave both have 6 percent coupon bonds outstanding, with semiannual interest payments, and both are priced

Problem 8-18 Interest Rate RISK Bond Sam and Bond Dave both have 6 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 18 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round Intermedlate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
