Question

Both Bond Bill and Bond Ted have 9.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 7 years to maturity, whereas Bond Ted has 24 years to maturity. Both bonds have a par value of 1,000. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price

Answer 1

A, the price of bond Bill and bond Ted will change by -9.35% and -15.87% respectively.

B. the price of bond Bill and Ted will change by 10.63% and 21.55% respectively.

Step-by-step explanation: