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Interest rate risk is associated with the bonds price variability given a change in the interest...

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Finance

Interest rate risk is associated with the bonds pricevariability given a change in the interest rates.

Suppose you have BOND A, which is a 30 year zero coupon bond andBOND B, which is a 5 year 10% coupon bond. If interest rates (YTM)change from 8% to 7% the bonds will increase in value. Suppose BONDA's price changes from $99.38 to 121.71 and the 5 year 10% couponbond price changes from $1079.85 to $1123.01. Which bond has thegreatest percentage increase in value? Record the percentageincrease in value of the bond with the highest percentage changebelow. Write the increase as a decimal, so a 5% increase would bewritten as 0.0500.

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Interest rate risk is associated with the bonds pricevariability given a change in the interest rates.Suppose you have BOND A, which is a 30 year zero coupon bond andBOND B, which is a 5 year 10% coupon bond. If interest rates (YTM)change from 8% to 7% the bonds will increase in value. Suppose BONDA's price changes from $99.38 to 121.71 and the 5 year 10% couponbond price changes from $1079.85 to $1123.01. Which bond has thegreatest percentage increase in value? Record the percentageincrease in value of the bond with the highest percentage changebelow. Write the increase as a decimal, so a 5% increase would bewritten as 0.0500.

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