What is the percentage price change of these bonds

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  Bond A        Bond B

Coupon Rate              5%               14%

Years-to-Maturity     10                 10

Yield-to-Maturity       7%                7%

Interest Payments    Semi-            Semi-

                                     Annual         Annual

A] What is the current price of these bonds?

B] If the interest rates rise by 2%, what is the percentage price change of these bonds?

C] If the interest rates fall by 2%, what is the percentage price change of these bonds?

D] What does this problem tell you about the interest rate risk of lower-coupon bonds?

Reference no: EM13809233

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