Which bonds are more sensitive to change in interest rates

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Reference no: EM132007368

Consider two bonds, a 3-year bond paying an annual coupon of 6.70% and a 10-year bond also with an annual coupon of 6.70%. Both currently sell at face value of $1,000. Now suppose interest rates rise to 12%.

a. What is the new price of the 3-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Bond price $

b. What is the new price of the 10-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Bond price $

c. Which bonds are more sensitive to a change in interest rates?

Long-term bonds

Short-term bonds

Reference no: EM132007368

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