Bond Jis a 3% coupon bond. Bond K is a 9% coupon bond. Both bonds have 15 years to maturity, make semiannual payments, and have a YTM of 6%. If interest rates suddenly rise by 2%, what is the percentage price change of these bonds? What if rates suddenly fall by 2% instead? What does this problem tell you about the interest rate risk of lower coupon bonds?

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.