Task 4: Bond Valuation (2 points) 7. GEM, Inc., has two bonds outstanding in the market. Both Bond X and Bond Y have 7 percent coupons, make semiannual payments, and are priced at par value. Bond X has 20 years to maturity, whereas Bond Y has five years to maturity. If interest rates suddenly rise by 2 percent (percentage points), what is the percentage change in the price of the two bonds? What if it falls by 2 percent instead? 8. Bond ABC has the following characteristics: 01/01/2020 - 01/01/2030 with annual coupon rate of 6% which is paid semiannually and that is currently priced at 10% higher than par. Based on them calculate YTM and current yield. B 1 Input 2 Bond X: Coupon rate Face value s Coupons per year 5 Years to maturity - Current price 2.0% e Bond Y: Coupon rate 1 Face value 2 Coupons per year 3 Years to maturity 4 Current price 5 6 7 Calculation & Output 8 Question 7 9 Increase in interest rate 0 New YTM 1 New Price of Bond X 2 New Price of Bond Y 3 4 % change in Bond X 5 % change in Bond Y 6 7 8 Fall in interest rate New YTM 0 New Price of Bond X 1 New Price of Bond Y 2 3 % change in Bond X 4 % change in Bond Y 5 6 2.0% 36 37 Question 8 38 Settlement date 39 Maturity date 40 Annual coupon rate 41 Coupons per year 42 Face value (% of par) 43 Bond price (% of par) 44 45 46 47 Current yield 48 49 Yield to maturity 50