Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 14 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 14 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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S07-20 Interest Rate Risk [LO2]
Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both
bonds have 14 years to maturity, make semiannual payments, and have a YTM of 6
percent.
If interest rates suddenly rise by 2 percent, what is the percentage price change of these
bonds? (A negative answer should be indicated by a minus sign. Do not round
intermediate calculations and enter your answers as a percent rounded to 2 decimal
places, e.g., 32.16.)
Percentage change in price of Bond J
Percentage change in price of Bond K
-21.59%
-17.55%
What if rates suddenly fall by 2 percent instead? (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Percentage change in price of Bond J
Percentage change in price of Bond K
29.74 %
23.33%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc174f88b-1b9c-462c-93e2-da9cad976329%2Fa4a8f088-2490-4305-879b-8ff44e7b43ce%2F83p2fhj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:80
S07-20 Interest Rate Risk [LO2]
Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both
bonds have 14 years to maturity, make semiannual payments, and have a YTM of 6
percent.
If interest rates suddenly rise by 2 percent, what is the percentage price change of these
bonds? (A negative answer should be indicated by a minus sign. Do not round
intermediate calculations and enter your answers as a percent rounded to 2 decimal
places, e.g., 32.16.)
Percentage change in price of Bond J
Percentage change in price of Bond K
-21.59%
-17.55%
What if rates suddenly fall by 2 percent instead? (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Percentage change in price of Bond J
Percentage change in price of Bond K
29.74 %
23.33%
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