Relationship in coupon rate and sensitivity of bond prices

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Question: Bond J is a 3 percent coupon bond. Bond K is an 11 percent coupon bond. Both bonds have 9 years to maturity, make semiannual payments, and have a yield to maturity of 7 percent. Suppose interest rates decrease from 7 percent to 5 percent. Calculate which bond will experience the greater percentage increase in price. Explain the relationship between coupon rate and the sensitivity of bond prices to interest rates.

Reference no: EM131947354

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