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coupon. As a bond investor you would like to evaluate the bond price sensitivity to underlying interest rate fluctuations for both Fidelity Music bond issues. a. What is the current price of both bonds? b. What will be the percentage change in bond price for both bonds if the underlying interest rates increase by 2% ? Which bond has more price sensitivity to interest rate risk? d. What conclusions do you draw from comparing your answers to parts b and c ? e. Would your answers to parts b through c change if both bonds matured in 13 years and paid a 12% annual coupon and, if so, how? a. The current price of the high yield bond is $. (Round to the nearest cent.) The current price of the investment grade bond is : (Round to the nearest cent.) b. The current price of the high yield bond if the underlying interest rate increases by 2% is ? (Round to the nearest cent.) The percentage change in bond price for the high yield bond if the underlying interest rate increases by 2% is i. (Round to two decimal places.) The current price of the investment grade bond if the underlying interest rate increases by 2% is (Round to the nearest cent.) The percentage change in bond price for the investment grade bond if the underlying interest rate increases by 2% is %. (Round to two decimal places.) c. The current price of the high yield bond if the underlying interest rate decreases by 2% is : (Round to the nearest cent.) The percentage change in bond price for the high yield bond if the underlying interest rate decreases by 2% is %. (Round to two decimal places.) The current price of the investment grade bond if the underlying interest rate decreases by 2% is ? (Round to the nearest cent.) The percentage change in bond price for the investment grade bond if the underlying interest rate decreases by 2% is %. (Round to two decimal places.) has more price sensitivity to interest rate risk because the percentage change in its price is after a decrease in the interest rate. (Select from the drop-down menus.) d. What conclusions do you draw from comparing your answers to parts b and c ? Other things equal, a bond with a required return has greater interest rate risk. (Select from the drop-down menu.) e. Would your answers to parts b through c change if both bonds matured in 13 years and paid a 12% annual coupon and, if so, how? (Select the best choice below.) A. No, the answers will not change. The bond with a lower required return has greater interest rate risk as long as the bond's coupon rate is higher than its required return. B. Yes, the answers will change. The bond with a lover required return has less interest rate risk if they have the same number of years to maturity. C. No, the answers will not change. The bond with a lower required return has greater interest rate risk no matter whether they are identical or not. D. Yes, the answers will change. The bond with a lower required return has less interest rate risk if they are identical except differing in the required returns. coupon. As a bond investor you would like to evaluate the bond price sensitivity to underlying interest rate fluctuations for both Fidelity Music bond issues. a. What is the current price of both bonds? b. What will be the percentage change in bond price for both bonds if the underlying interest rates increase by 2% ? Which bond has more price sensitivity to interest rate risk? d. What conclusions do you draw from comparing your answers to parts b and c ? e. Would your answers to parts b through c change if both bonds matured in 13 years and paid a 12% annual coupon and, if so, how? a. The current price of the high yield bond is $. (Round to the nearest cent.) The current price of the investment grade bond is : (Round to the nearest cent.) b. The current price of the high yield bond if the underlying interest rate increases by 2% is ? (Round to the nearest cent.) The percentage change in bond price for the high yield bond if the underlying interest rate increases by 2% is i. (Round to two decimal places.) The current price of the investment grade bond if the underlying interest rate increases by 2% is (Round to the nearest cent.) The percentage change in bond price for the investment grade bond if the underlying interest rate increases by 2% is %. (Round to two decimal places.) c. The current price of the high yield bond if the underlying interest rate decreases by 2% is : (Round to the nearest cent.) The percentage change in bond price for the high yield bond if the underlying interest rate decreases by 2% is %. (Round to two decimal places.) The current price of the investment grade bond if the underlying interest rate decreases by 2% is ? (Round to the nearest cent.) The percentage change in bond price for the investment grade bond if the underlying interest rate decreases by 2% is %. (Round to two decimal places.) has more price sensitivity to interest rate risk because the percentage change in its price is after a decrease in the interest rate. (Select from the drop-down menus.) d. What conclusions do you draw from comparing your answers to parts b and c ? Other things equal, a bond with a required return has greater interest rate risk. (Select from the drop-down menu.) e. Would your answers to parts b through c change if both bonds matured in 13 years and paid a 12% annual coupon and, if so, how? (Select the best choice below.) A. No, the answers will not change. The bond with a lower required return has greater interest rate risk as long as the bond's coupon rate is higher than its required return. B. Yes, the answers will change. The bond with a lover required return has less interest rate risk if they have the same number of years to maturity. C. No, the answers will not change. The bond with a lower required return has greater interest rate risk no matter whether they are identical or not. D. Yes, the answers will change. The bond with a lower required return has less interest rate risk if they are identical except differing in the required returns

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