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Both Bond Sam and Bond Dave have 9 percent coupons, makesemiannual payments, and are priced at par value. Bond Sam has 5years to maturity, whereas Bond Dave has 19 years to maturity.


Requirement 1:
(a) If interest rates suddenly rise by 2 percent, whatis the percentage change in the price of Bond Sam?
(b) If interest rates suddenly rise by 2 percent, whatis the percentage change in the price of Bond Dave?


Requirement 2:
(a) If rates were to suddenly fall by 2 percentinstead, what would the percentage change in the price of Bond Sambe then?
(b) If rates were to suddenly fall by 2 percentinstead, what would the percentage change in the price of Bond Davebe then?

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Keith Leannon
Keith LeannonLv2
28 Sep 2019
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