Transcribed Image Text
Using the following information to answer the followingquestions?Both Bond A and Bond B have 8 percent coupons, make semiannualpayments, and are priced at par value. Bond A has 3 years tomaturity, whereas Bond B has 20 years to maturity.a. If interest rates suddenly rise by 2 percent annually (to 10%annually right now), what would be the percentage changes in theprices of Bond A and Bond B?b. If rates were to suddenly drop by 2 percent instead (to 6%right now), what would be the percentage changes in the prices ofBond A and Bond B?c. What does this problem tell you about the interest rate riskof long-term bonds?
Other questions asked by students
Chemistry
Mechanical Engineering
Accounting