Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 9 percent. Both bonds have 9 years to maturity, make semiannual payments, and have a YTM of 7 percent. If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J? -17.95% -15.97% -16.97% -17.97% If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K? -14.82% -16.80% -16.82% 27.26% If Interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J? -17.99% 23.11% 23.09% -23.38% If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K? 21.46% -4.84% 21.34% O-16.84%

Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 9 percent. Both bonds have 9 years to maturity, make semiannual payments, and have a YTM of 7 percent. If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J? -17.95% -15.97% -16.97% -17.97% If Interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K? -14.82% -16.80% -16.82% 27.26% If Interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J? -17.99% 23.11% 23.09% -23.38% If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K? 21.46% -4.84% 21.34% O-16.84%

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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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 9 percent. Both bonds have 9 years to maturity, make semiannual payments, and have a YTM of 7 percent.

**Questions and Options:**

1. **If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J?**
- ○ -17.95%
- ○ -15.97%
- ○ -16.97%
- ○ -17.97%

2. **If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K?**
- ○ -14.82%
- ○ -16.80%
- ○ -16.82%
- ○ 27.26%

3. **If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J?**
- ○ -17.99%
- ○ 23.11%
- ○ 23.09%
- ○ -23.38%

4. **If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K?**
- ○ 21.46%
- ○ -4.84%
- ○ 21.34%
- ○ -16.84%

This exercise illustrates how changes in interest rates can affect bond prices differently depending on the bond's characteristics, such as its coupon rate and time to maturity. Understanding these concepts is crucial for investors when making decisions in the bond market.

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