Both Bond Sam and Bond Dave have 6.5 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? Of Bond Dave? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? Of Bond Dave? All bond price answers should be dollar prices.

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
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Both Bond Sam and Bond Dave have 6.5 percent coupons, make semiannual
payments, and are priced at par value. Bond Sam has 3 years to maturity,
whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by
2 percent, what is the percentage change in the price of Bond Sam? Of Bond
Dave? If rates were to suddenly fall by 2 percent instead, what would the
percentage change in the price of Bond Sam be then? Of Bond Dave? All
bond price answers should be dollar prices.
Bond Sam:
Coupon rate
Settlement date
Maturity date
Redemption (% of par)
# of coupons per year
Bond Dave:
Coupon rate
Settlement date
Maturity date
Redemption (% of par)
# of coupons per year
Sheet1
1
***
6.5%
1/1/2000
1/1/2003
100
2
6.5%
1/1/2000
1/1/2020
100
2
4
Transcribed Image Text:Both Bond Sam and Bond Dave have 6.5 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? Of Bond Dave? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? Of Bond Dave? All bond price answers should be dollar prices. Bond Sam: Coupon rate Settlement date Maturity date Redemption (% of par) # of coupons per year Bond Dave: Coupon rate Settlement date Maturity date Redemption (% of par) # of coupons per year Sheet1 1 *** 6.5% 1/1/2000 1/1/2003 100 2 6.5% 1/1/2000 1/1/2020 100 2 4
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