1) Explain the concept of interest rate risk in bond investment 2) show a numerical example of it by calculating % changes in price for 1 year and 3-year annual coupon bonds. Assume coupon interest rate = 12%, Yield to Maturity = 6%, Face value= 100. Use 2% increase in YTM (i.e., 6% → 8%).

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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1) Explain the concept of interest rate risk in bond investment

2) show a numerical example of it by calculating % changes in price for 1 year and 3-year annual coupon bonds.

Assume coupon interest rate = 12%, Yield to Maturity = 6%, Face value= 100. Use 2% increase in YTM (i.e., 6% → 8%).

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