Bond Sam and Bond Dave both have 7 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has four years to maturity, whereas the Bond Dave bond has 15 years to maturity.   If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?         If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then?

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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.