Relationship in initial yield to maturity and interest rate

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Reference no: EM13880115

BVA Inc. has two bond issues outstanding; each with a par value of $1,000 information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bonds? Does this yell us anything about the relationship between initial yield to maturity and interest rate risk?

Bond A: 12 years to maturity, pays a 7% coupon, and the market interest rate on this BB-rated bond is 12.36%

Bond B: 12 years to maturity, pays a 7% coupon, and the market interest rate on this A-rated bond is 10.25%

Reference no: EM13880115

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